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THE LIBRARY

OF

THE UNIVERSITY

OF CALIFORNIA

LOS ANGELES

SCHOOL OF LAW

M.C

^>^

THE LAW

OF

UNINCORPORATED
ASSOCIATIONS

AND SIMILAR RELATIONS

BY ,

SYDNEY R. WRIGHTINGTON

r, \

OF THE BOSTON BAR

BOSTON

LITTLE, BROWN, AND COMPANY

1916

Copyright, 1916,
By S. R. Wrightington.

All rights reserved.

THE UNtVERSITT PUESS, CAMHUIDGE, V. S. A.

PREFACE

The development of the law of corporations was the
overshadowing feature of legal history in this country
in the last quarter of the nineteenth century. It was
accompanied by an unreasoning public hostility to
corporations which bore fruit in the imposition of
taxes and regulations by Legislatures which in many
cases have seriously impaired the efficiency of this
form of organization for cooperative business enter-
prise. One of the most striking features of the recent
decisions of the Courts is the evidence that business
men are reverting to unincorporated associations to
carry out their purposes. Owing to peculiar local
restrictions on corporations these associations have
been more largely used and more highly developed in
Massachusetts than elsewhere. To them the lawyers
of other states are now turning for relief. These asso-
ciations are organized under the terms of elaborate
trust deeds and resemble closely the important fea-
tures of corporations. The law on many of the most
important questions raised by these instruments is
still in the making. Some attempt at classification
seems urgently needed if only as a basis for criticism
and future development.

Underwriting syndicates are another kind of unin-
corporated cooperative organization dealing with finan-
cial operations of vast importance. Among other asso-
ciations not organized for profit, especial interest
today attaches to stock exchanges, trade unions and

iii

66V7G2

PREFACE

religious associations. In view of the interest aroused
in these subjects it has seemed desirable to prepare a
text book covering the entire field of unincorporated
associations.

No comprehensive classification of the whole sub-
ject has been made in recent years. Some aspects of
it have been touched upon in treatises upon other
subjects. Indeed it is surprising under how many
unfamiliar titles the authorities have been concealed
in the digests and encyclopaedias. Though the law of
associations has in recent years proved an alluring field
for speculation by authorities upon jurisprudence, this
book is intended primarily for the convenience of the
practitioner. For that reason the familiar part of the
law has been condensed and the citations distinguished
by indicating some striking characteristic in the facts
of each. Brief abstracts of the others are given in the
notes. In an appendix are printed forms consisting
mainly of the deeds of trust of business organizations
that have been considered in the important recent de-
cisions or have been used in practice. It is hoped that
these will prove suggestive to attorneys desiring to
prepare such papers.

The author desires to acknowledge his indebted-
ness to John L. Thorndike, Esq., of the Boston Bar, for
important suggestions.

S. R. Wrightington.

Boston, Mass., Oct. 20, 1915.

IV

CONTENTS

CHAPTER I

INTRODUCTION

SEC. PAGE

1. Definition 1

2. Classification 4

3. Law Applicable 5

4. Modern Tendencies 7

CHAPTER II

ASSOCIATIONS FOR PROFIT

5. Early Companies 8

6. Informal Associations for Profit 8

7. Mining Partnerships 10

8. Syndicates 11

9. Statutory Joint Stock Associations 12

10. Defective Incorporations 26

11. Formal Associations for Profit 28

12. The Law Applicable to Informal Associations for Profit . . 36

13. The Law Apphcable to Formal Associations for Profit ... 39

14. The Distinction between Partnerships and Trusts 40

15. Declaration of Intention 62

16. Unincorporated Companies under the Bankruptcy Act ... 62

17. Associations for Profit Distinguished from Tenancies in

Common 66

18. Holding Companies 73

19. Application of Law of Partnership to Associations for Profit . 76

20. Membership in Informal Associations for Profit 77

21. Property Rights in Associations for Profit 78

22. Powers of Members of Associations for Profit 88

23. Pleading of Informal Associations for Profit 94

24. Rights and Liabilities of Shareholders 98

25. Termination of Liability 107

26. Dissolution by Transfer Ill

27. Dissolution by Death 118

28. Winding up Informal Associations for Profit 120

29. Limitation of Liabihty of Shareholders 123

30. Effect of Notice 125

31. Express Stipulation in Contracts with Third Parties .... 129

32. Remedies of Creditors 132

V

CONTENTS

SEC. PAGE

33. Trustees of Associations for Profit 133

34. Propriety of Investments by Trustees in Shares in Associations

for Profits 138

35. Governmental Control over Associations for Profit .... 139

36. The Uniform Partnership Act 144

CHAPTER III

TKUSTS

37. In General 149

38. Trusts for Creditors 151

39. Car Trusts 152

40. Trusts for Bondholders 153

41. Voting Trusts 154

42. Combinations 154

43. Rights of Creditors 155

44. Mutual Obligations of Trustee and Beneficiary 160

45. Representation of Beneficiaries by the Trustee 164

46. Management of Trust Estate 167

47. Change of Trustee 169

CHAPTER IV

UNASSOCIATED GROUPS

48. In General 171

49. Lloyd's Insiu-ance 171

50. Underwriters of Securities 182

51. Unsuccessful Incorporators 191

52. Tenants in Common 192

53. Common Agents 197

CHAPTER V

NON-PROFIT ASSOCIATIONS

54. Definition 199

55. Admission of Members 208

56. Expulsion of Members 213

57. lOxhaustion of Remedies within the Association 224

58. Internal Affairs 227

59. "Ultra Vires" 238

60. Property 239

61. Property of ReUgious Associations 254

62. Du(-H 269

(hi. Mutual Obligations of Members 273

64. Liability of Mcrnbens 275

65. ]>iability of Mcmbctrs of Associations of Employers and of

ErnployecH . , 285

66. Kight.sof Creditors to Reach the Funds of the ABSociation . . 293

67. Powers of Ofliccrs 296

vi

CONTENTS

SEC. PAGE

68. Liability of Officers and Agents 298

69. Dissolution 301

70. Parties in Litigation 307

APPENDIX OF FORMS 315

INDEX 471

Vll

TABLE OF CASES

PAGE

Abbott V. Cobb 300

Abel V. Love 70

Abels V. McKeen 238, 306

Abernathie v. Virginia Co. 92

Abington Co. «;. Reynolds 21

Adams Express Co. v. Scho-

field 2, 15

Addam's Appeal 135

Ahlendorf v. Barkons 250

AieUo V. Montecalfo 245

Aikens v. Wisconsin 286

Albert Life Assurance Co. 132, 133

Alchenburger v. Lodge 245, 250

Alexander v. Bowers 227

V. Ellison 197

Alleghany Banks v. BaUey 21

AUen V. Clark 17, 312

V. Duffie 270

V. Harper 194

V. Long 121

V. Roby 227

Aluminum Co. z). Local No. 84 290

Alvord V. Smith 40, 109

Amal. Soc. v. Osborne 238

American Co. v. Converse 133, 155

V. Kentucky Co. 167

American, etc. Ass'n v. Ln-

porters' Ass'n 95

American, etc. Co. v. Wire

Drawers, etc. Union 308, 310
Am. Fed. of Labor v. Buck's

Stove Co. 290

American Lucol Co. v. Blan-

chard 180

V. Lowe 180

Amish V. Gelhaus 241

Anaconda Co. v. Butte Co. 69

Andrew's and Alexander's

Case 202

Andrews v. Brace 25

V. Wilson 170

Andrews Bros. Co. t^. Youngs-
town Coke Co. 22
Annie H. Smith, The 197
Anthony v. Campbell 167
A. O. U. W. V. A. O. U. W. 251,

305

PAGE

Apollo, The 197

Apostolic Union v. Kundson 249

App V. Lutheran 259

Appeal of Baylor 313

Fisher 23

Gebhart 21

Gumbert 306

Hedge 77

Landis 262

Moss 123

April V. Baird 313

Arkins v. Dominion Live

Stock Association 276

Arnold v. Conklin 27

V. Searing 135

Arts V. Guthrie 307

Ash V. Guie 201, 276

Ashley v. Dowhng 8, 37, 118

V. Henderson 301

Ashuelot R. R. v. Elliott 160

Associated Trust, The, Re 2, 39,

48, 62

Athenaeum Life Assiu-ance

Society 131

Attorney General v. Clark 312

V. Dublin 245

V. Federal St. 28, 209, 239, 240,

246, 258, 263

V. Geerlings 233

V. McVickie 24

V. Mercantile Co. 13

Augusta Club v. Cotton

States, etc. Fair Ass'n 276

Auracher v. Yerger 229

Austin V. Searing 233

V. Shaw 243, 244

Austrahan Co. v. Mounsey 136
Avery v. Baker 241

Babb V. Reed

37

Bacliman v. Harrington

222

V. Hofman

235

Bacon v. Brotherhood

249

V. Dinsmore

13

Bailey v. Macauley

301

Bain v. Loan Ass'n

98

Baird v. Wells 215,

222, 223

TABLE OF CASES

PAGE

Baker v. Nachtrieb 253

Ballou V. Famum 157

V. Wood 193, 194
Baltimore Trust Co. v. Ham-

bleton 94

Band v. Infantry 299
Bank of Topeka v. Eaton 125, 127
Bank of Toronto v. Manf. &

Merch. Fire Ass'n 179

Baptist Church v. Witherell 245

Bar Co. V. Zimmerman 97

Barbaud v. Hook ham 275

Barbour v. Weld 169

Barker v. Barker 48

V. ^^^^ite 133

V. Wood 246

Barkley v. Hayes 265

Barnard v. WTiipple 246

Barndollar v. Du Bois 109, 123

Barnes v. Berry 282

V. Boardman 196

V. People 175

Barnes Co. v. Chicago Union 307

Barnett v. Lambert 27, 301

Barney v. Chittendon 168

V. Leach 197

V. Saunders 164

Barr v. Essex Trades Council 290

Barrell v. Joy 164

Barry v. Nuckolls 278

Bartholomae v. Kaufifman 298

Bartlett v. Bartlett 218

V. Boyles 92, 122

V. Gill 87

V. King 247

Barton v. Fitzpatrick 236

Barzilay v. Loewenthal 282

Bascom v. Lane 268

Base Ball Ass'n v. Club 2

Bastrop and Austin Rice

Growers' Ass'n v. Lochran 295

Bates V. Huston 234

Batty V. Adams County 82

Bauer v. Samson Lodge 226

V. Seegar 232
Beaman v. Whitney 77, 88, 109

lioan V. American L. & T. Co. 162

Bear v. Heasly 265

Beaty v. Bordwell 197

Beatty v. Kurtz 309

Beaumont v. Meredith 302

Iicav(!r'H Adrn. v. McGrath 131

Beck V. Railway Teamsters 290

Becchcr v. HuHh 62
Bellows Fall.s Paper Co. v.

Commonwealth 83

Belton V. Hatch 210

Ben Co. v. Zimmerman 2(i

PAGE

Bennett v. Keama

274

V. Latlu-op

98

V. Morgan

261

Bentle v. Ulay

265

Bentley v. Brossard

69

Berg V. Unterstutzungs Verein 272
Berkeley v. Green 164

Bernard Co. v. Packard 22

Berry v. Cross 121

V. Donovan 288

Berry Bros. v. Hooper's Est. 24
Berryman v. Reese 306

Bestor v. Barker 94

Betts V. Betts 247

Bible Soc. v. Pendleton 247

Biggert v. Hicks 179

Bilhngton v. Gauthier Co. 19

Bingaman v. Hickman 164

Birmingham v. Gallagher 309

Bisbee v. MacKay 81, 135

Bishop V. Bishop 15

Bissell V. Foss 116

Black V. Wiedersheim 161

Blackmarr v. WiUiamson 121

Black Rabbit Ass'n v. Munday 245
Blair v. National Shirt &

Overalls Co. 180

Blakely v. Bennecke 299

Blanchard v. Newark Council 224
Blatchford v. Ross 18

Bloets V. Simon 309, 312

Bochme v. Fitzgerald 103

Bodey v. Cooper 25

Bodwell V. Eastman 15, 125

Bogardus v. Reed 68

Bohn Mfg. Co. v. Hollis 290

Bonacum v. Harrington 229

Bonham v. Harris 265

Boody V. Drew 11, 134

Booth V. Dodge 134

Bose V. Christ 259

Bossert v. Dhuy 288, 307

V. United Brotherhood 220,
288
Bottom V. Tinsley 235

Boucher v. Mulverhill 69

Bouldin v. Alexander 214, 234,
260, 251, 262
Boutwell V. Marr 289, 291

Bowen v. Matheson 289

Boyd V. Merriell 104

Boyer v. Nesbitt 154

Boylan v. Fay 160

Uoylcs 1). Roberts 265

liiiulfonl V. National Benefit

Ass'n 107

Bradley v. Harkness 70

V. Pierson 289

TABLE OF CASES

Bradley Fish Co. v. Dudley 88
Brady v. Mattern 141

Branagan v. Buckxnan 202, 211,

237
Brandon v. Worley 298, 314

Branson v. I. W. W. 288, 310

Bray v. Farwell 17

Brennan v. United Hatters 219
Brewster v. McCall 246

Briar Hill Co. v. Atlas Works 19
Bridenkeker v. Hoard 311

Brightman v. Bates 154

Bristor v. Burr 236

British Red Cross Soc. v.

Johnson 306

Broadway Nat. Bank v. Wood 159

Brooke v. Schaklets 269

Brooks V. Dinsmore 13

Brower v. Crimmins 297

Brown v. Clark 265

V. Dale 304

V. Lewis 295

V. Lutheran 269

V. Moore 258

V. Parker 170

V. Stoerkel 202, 249

Brown's Estate 151

Broyles v. McCoy 99

Brundage v. Deardorf 264, 265

Bryant v. Goodnow 104

Bryson v. Wood 169

Buck V. Spofford 67

Bullard v. Attorney General 168

V. Kinney 103

Burganv. Lyell 91, 110

Burgett V. TaUafero 196

Burke v. Rhoads 181

V. Roper 201, 215, 302, 303,

306

Burle V. Smith 301

Burm ester v. Norris 136

Burnetta v. Marceline Co. 282

Burnham v. Dowd 288

Burr V. Smith 248

Burrows v. Holt 243

Burt V. Grand Lodge 223

V. Lothrop 44, 281

V. Oneida Community 254

Burton v. Grand Rapids Co. 277

Burwell v. Mandeville's Exec. 150

Busby V. Mitchell 241

Busch V. Stromberg Co. 190

Bushong V. Taylor 294

Butterfield v. Beardsley 80

Byam v. Bickford 88, 246

Bybee v. Hawkett 188

Byington v. Piazza 161

Byrne v. B. U. 222

Cahill V. Bigger
Cain V. Armenia Lodge
Caldicott V. Griffiths
Callsen v. Hope
Calvert v. Aldrich

PAGE

261

307
298
309
197

Camden, etc. R. Co. v. Penn-
sylvania Guarantors 96, 98,
110
Cameron v. First Bank 123

Campbell v. Johnson 224

V. R. R. 160

Cantrill Telephone Co. v.

Fisher 211

Cape V. Plymouth Church 259
V. Plymouth Church 264

Carlen v. Drury 106

Carne v. Long 33

Carothers v. Moseley 265

Cai-penter v. Westchester

County Historical Soc. 247

Carrick v. Conevin 295

Carrier v. Price 33

Carskadon v. Torreyson 248

Carter v. McClure 115, 119

V. Producers Co. 23

V. Producers Oil Co. 19

Castner v. Rinne 297

Cater v. Everleigh 160

Central Bank v. Sheldon 26

Cercle Frangais v. French 213
Chamberlain v. Lincoln 224

Chambers v. Calhoun 270

Chancey v. May 95

Chapin v. First Universalist

Society 133, 134

Chapman v. Barney 2, 16

Charles v. Eshleman 68

Chase V. Cheney 229

V. Ladd 168

V. Prendergast 200

Cheatham v. Rowland 164, 165

Cheney v. Clark 274, 300

V. Goodwin 270, 274, 280

V. Ketcham 214

Chick y. Trevatt 299

Chickering, Re 166

Childers v. Neely 70

ChiU Soc. V. Bowen 247

Chippendale, Ex parte 136

Chi-istian Church v. Church

of Christ 244

Church V. Chfton 307

V. OdeU 195

V. Wells 246

Cincinnati Co. v. Citizens'

Bank 39, 108

Citizens' Bank v. Bank of
Commerce 87

TABLE OF CASES

Citizens' Bank v. Los Angeles

Co. 166

V. Vaughan 24

Claflin Co. v. Middlesex Co. 170
Clagett V. Kilbourne 71, 79

Clancy v. Terhune 312

Clark V. O'Rourke 299

V. Reed 124

Clayton's Case 306

Cleland v. Anderson 307
Clerk's Inv. Co. v. Sydnor

121 122
Clery v. Brown ' 220

Clough V. RatcUffe 273

Cock V. Bailey 20

Cockburn v. Thompson 95

CockereU v. Aucompte 280

Coe V. N. J. R. R. Co. 165

Cogswell V. BuUock 231

Cohen v. Gwynn 108

Cohn V. Borst 312

Coit V. Tracy 136

Colburn v. Grant 162

Coleman v. Coleman 94

V. Connolly 167

Coleman's Estate 164

Colley V. Wilson 311

Colton V. Raymond 18

Comes V. Clark 155

Comfort V. Graham 298
Commonwealth v. Adams

Express Co. 15
V. Green 230
V. Hunt 286
V. Pomphret 212, 213
V. Reinoehl 176
V. Rosen 132
V. Union Co. 163
V. Union League of Phil-
adelphia 216
V. Vrooman 177
Compton V. Beccher 178
Compton's Will, Re 247
Conant v. Jones 178
Confcr(!nce v. Allen 234
Congregational Soc. v. Swan 270
Congregational Unitarian Soc.

V. Halo 248

Connell v. Stalker 224

V. United Hatters 295

Connett v. Rciformed Church 230

Connolly v. Masonic Mat.

\U'j\. A.ss'n 219

CoiiovcT V. Karl 194
Con.solifjatr^d Water Co. /;.

San Diego 165
Continental Ins. Co. v. iioard

of Fin- Underwriters 289

PAGE

Continental Nat. Bank v.

Heihnan 11, 88

Conway v. Zender 103, 309

Cook V. Gray 125

CooUdge V. Taylor 77

Coombs V. Harford 298, 312

Cooper V. Lankford 151
Cornfield v. Order Brith

Abraham 202, 312

Corning v. Greene 313

Corregan v. Hay 226

Cortes Co. v. Tannhauser 94

Cote V. Murphy 287

Cotton Ass'n v. Taylor 217

Cox V. B9dfish 39, 108

V. Hickman 57, 152

V. Watts Co. 21

Coyne v. Caples 197
Craig t^. Inhabitants of Frank-

Un County 245

Crawford v. Cross 123

V. Nies 243

Crawley v. Am. Soc. of

Equity 299

Crimm's Appeal 106

Crittenden v. Armour 183

Cross V. Jackson 104

V. WilUams 300

Crow V. Capital City 215, 217,

219

Crowther v. Thorley 45

Cruse V. Jones 299

Cucurillo V. Societa 224

Cuff V. Heine 181

CuUen V. Queensbury 299

Cunniff V. Jamovu- 271

V. McDonnell 163, 164

Curran v. Galen 289

Currie, Re 210

Curry v. Dorr 157

Curtis V. Leavitt 165

Curtiss V. Hoyt 249

Gushing V. Breed 193

Cutbush V. Cutbush 155

Cutler V. Thomas 99

Dady v. Georgia 161

Dahl V. Palache 235

Dailey v. Fitzgerald 118

Danl^ury Cornet Band v.

Bean 124

Daiiforth v. Allen 121, 125, 127

Dani(>ls v. Hart 157

Daniher v. Grand Lodge 231

Darby v. Darby 79

Davidson v. Holden 276

V. Knox 312

Davies v. Hawkins 93

Xll

TABLE OF CASES

PAGE

128
295
166
9, 27
215, 238
215
166
234
118

Davis V. Beverly
V. Bradford
V. Hemingway
Davison v. Holden
Dawkins v. Antrobus
Dawson v. He well
Day V. Wetherby
Deaderick v. Lampson
Decker v. Howell
Deckert v. Chesapeake, etc.

Co. 25

Delauney v. Strickland 276

Dellapiazza v. Foley 110

Denne v. Judge 194

Dennis v. Kennedy 137

Derry v. G. H. L. M. M. 218

Determann v. Luehrsmann 309
Detroit Schuetzen Band v.

Detroit Agitations Verein 307

Develle v. Plummer 311
Devoss V. Gray 276, 278
Dickerman v. Northern Trust

Co. 166

Dickinson v. Mathewson Co. 24

V. Valpy 90
Dieffendorf i'. Reformed

Church 229
Diggs V. Fidelity Co. 168
Dillworth v. Ackley 80
Dingwall v. Assoc. 217, 220
Dochkus V. Lithuanian Soc. 314
Dodd V. Armstrong 219
Dodge V. Talleys 165
Dolan V. Court Good Samari-
tan 226
Donald v. Guy 99
Donaldson v. Allen 167
Donnell v. Herring Co. 1
D'Ooge V. Leeds 15
Doubleday v. Muskett 26
Douchitt V. Stinson 244
Dougherty v. Creary 92
Douglas V. Merceles 123
Dow V. Moore 88, 98
Downer v. Smith 195
Downes v. Bennett 289
Downing v. Mann 279
V. Marshall 248
Dowse V. Gorton 159
V. Gorton 160
Doyle V. Burke 223
V. Burns 69
V. Reid 242
Draper v. Man vers 301
Drew V. Hogan 310
Dubs V. Egli 244
Duckworth v. Ocean Co. 168
Dudley v. Piatt 97

Duessel v. Proch

PAGE

234

Duke V. Fuller

305

Dunham v. Blood

159

Durel V. Perseverance Fire

Co.

217

Durham Co. v. Clute

28

Durkee v. People

153

Duryea v. Burt

87

Dutton, In re

33

Dwenger v. Geary

246

Dyer v. Riley

162

Eagle V. Bucher 94

Earle v. Wood 237, 240, 266

East Haddam Church v.

East Haddam Soc. 239, 244

Ebbinghousen v. Worth Club 293
Edenborn v. Sim 185

Edge worth v. Wood 15

Edlinger v. Southern Oil Co. 93
Edmunds, Ex -parte 159

Edwards v. Old Settlers Ass'n 82
V. Warren, etc. Works 16

Egan V. Bonacum 309

Ehrenfeld's Appeal 234

Ehrlich v. Willenski 276

Ehrmann traut v. Robinson 278
Eichbaum v. Irons 276, 279

Eis V. Croze 243

Ehas V. Schweiger 169

EUot V. Freeman 139

V. Hinrod 19

Elkington v. London Ass'n 295
Ellison V. Bignold 107

Elwell V. Tatum 281

Ely V. Ely 247

Emonds v. Termehr 300

Engel V. Walsh 216, 224

Engine Co. v. C. 221

English V. Wall 98

English, etc. Assurance Society 132
Engvall w. Buchie 111, 132

Enterprise Co. v. Mundy 179, 181
Equitable Co. v. Fisher 169, 170
Erdman v. Mitchell 288

Ervin v. Masterson 70

Estabrook v. Woods 47

Estate of Ahl 169

EttUnger v. Persian Co. 167

Evans, Re 155, 159

Evans v. Hooper 97

V. Lilly 299

V. Philadelphia Club 215

Evenson v. Spaulding 310

Everett v. Drew 157

V. Duss 253

V. First Presbyterian

Church 238, 242

TABLE OF CASES

Ewing V. Medlock
Exmouth, Ex parte
Express Co. v. State

311
34
15

Fair v. First Church 234

Fairbanks v. McDonald 287

Fairchild v. Adams 275

Fallardeau v. Boston Ass'n 157
Fall River WTialing Co. v.

Borden 66, 67

Falmouth Bank v. Cape Cod

Co. 167

Fareira's Appeal 107

Fargo V. L. N. A., etc. Co. 14

V. McVicar 14

Far j eon v. Fogg 179
Farmer v. Kansas City Board

of Trade 216

Farmers' Co. v. Chicago 169, 170

V. Hughes 169

V. Jones 26, 29

V. Lake Street Ry. Co. 153

Famham v. Patch 110

Farnsworth v. Storrs 275

Farrand v. Gleason 197

FarreU v. DalzeU 304

Faure Electric Accumulator

Co., In re 45

Fay V. Noble 26, 191

Feiner v. Reiss 237
Feizil V. Trustees of German

IM. E. Society 258

Fells V. Read 242

Fenwick v. Lay cock 155

Fereday v. Wightwick 116

Ferguson v. Bateman 134

Fernstler v. Siebert 261

Ferraria v. Vasconcellos 263

Ferris v. Thaw 201, 276
Fetner v. American National

Bank 207
FideUty Co. v. Shenandoah

Co. 165

Field V. Field 237

Fink V. Bay Shore Co. 166

V. Umshied 241

Finlov V. Brent 258

FirstBank v. G. B. V. Co. 69

V. Rector 276

V. Shodd 166

First Church v. Cumberland

Church 265
V. First Church 265
V. \hi^)^'T 201
First National Bank v. .Mniy 27
First National iiunk of Ot-
tawa V. Converse 102
First Nat. Co. v. HaUsbury 166

First Presbyterian Church

V. Wilson 227, 264

First Presbyterian Soc. v.

Bass 246

Fischer v. Reab 302

Fisher v. Keane 221, 223

Fiske V. Eldridge 155

Fitzpatrick v. Rutter 310

Fleming v. Hector 276, 280

V. Lay 99

Fletcher v. Rutland Co. 169

V. Tribe 293

Fobes V. Shattuck 197

Foreman v. Fayerson 234

Fort V. State 174

Forward v. Allen 164

Fox V. Narramore 276

Francis v. Harrison 165

V. Perry 211, 238, 313

V. Taylor 14

Frank v. Drenkhahn 28

Frankhn v. Burnham 219, 232

Fredenhall v. Taylor 298
Free Church of Scotland v.

Overtown 267

Freedman's Co. v. Earle 82

Freeman v. Hemenway 118

French v. Barre 243

V. Price 67, 192

V. Styring 67

Frith, Re 157

Fritz V. Knaub 225

V. Muck 17, 103, 220, 221

Froehch v. Benefit Ass'n 220

Frost V. Thompson 49, 158, 316,

317

V. Walker 77, 98

Frothingham v. Barney 18

Fry, Re 94

Fuchs V. Meisel 261

Fugure v. Burlington St.

Joseph's Mut. Soc. 272
Fullhright v. Higginbotham 225

Fuller V. Rowe 26, 109

Furniture Co. v. Union 307

Fussell V. HaU 228

Gaines v. Farmer
Galveston City Co. v. Scott

233
78,
106

Gardiner v. Gardiner 81, 138

Garland, Ex parte 150, 155

Garrand v. Hartley 103

Gartin v. Pennick 262

Gaselys v. Sepaj'atist Soc. 253

Gass v. Wilhite 253

Galzow V. Huening 289, 291

Gearing v. Carroll 20

XIV

TABLE OF CASES

Gebhard v. N. Y. Club 225

Geel i;. Goulden 24

German Land Ass'n v.

SchoUer 239

Getty V. Devlin 94

Gewin v. Mt. Pilgrim Chm-ch 239,

240
Gibbs V. Gilead • 230

Giblan v. National, etc. Union 287
Gibson v. Armstrong 269

Gieske v. Anderson 312

Gilbert v. Crystal Lodge 275

Gilchrist v. Transp. Co. 180

Gipson V. Morris 236

Githens v. Grocery Co. 19

Gleason v. McKay 41, 43, 142
Glenn v. Allison 130, 157

Globe Refining Co., Re 21

Glover v. Baker 248

Godfrey v. Walker 262, 314

V. White 197

Godmundson v. Thingvalla

Church 260, 267

Goell V. Morse 67, 194

Goesele v. Bimeler 37, 239

V. Bimeler 9, 202, 233, 235,
254
GoUer v. Strubenhaus 233

Goode V. McPherson 259

Gorman v. Russell 202, 310

V. Russell 302

Gortemiller v. Rosengarn 295

Gott V. Dinsmore 15

Gough V. Satterlee 176, 179

Gould V. Head 150

Goulding v. Standish 232

Grady v. Robinson 110

Graff V. Evans 251, 252

Grain's Case 133

Grand Lodge, K. P. v.

Germania Lodge 305

Grand Rapids Guard v. Bulk-
ley 233
Grassi v. O'Rourke 215
Gray v. Pearson 202
Great Southern Co. v. Jones 2
Greek Church v. Greek Church 264
Greene v. Dennis 246, 247
V. People 173
Greenup v. Barbee's Exec. 98, 136
Greenwood's Case 126
Greer v. Stoller 220, 308
Greves v. Shaw 81, 83
Griffiths V. Cope 243
Grosvenor v. Lloyd 110
V. United Society of Be-
lievers 218
Guild V. Allen 248

Guinane v. Sunnyside Boating
Co. 217, 218

Habicht v. Pemberton 310

Hackney v. Vawter 234

Hadden v. Chorn 261

Haden v. Clark 313

Haines v. Kinderhook 162

Halbert v. Traders' Exchange 272
Halket v. Merchants', etc.

Ass'n 131

Hallett V. Dowdell 126, 131, 132,

133
Hamblet v. Bennett 246

Hambleton v. Rhind 11

Hammerstein v. Parsons 39, 202,

276
Hancock v. Thorpe 195

Hancox v. Wall 162

Hanley v. Tel. Co. 215, 220, 307,

308
Hanson v. Innes 287, 290

Happy ;;. Morton 244, 245

Hardoon v. Belihos 159, 163, 277
Hardy v. Carter 280

Harper v. Raymond 108, 115

V. Straws 262

Harrington v. Sendall 271

V. Workmen's Ass'n 226

Harris v. Aiken 217, 218, 219

V. Cosby 265

V. Lloyd 195

V. Wilson 311

Harrisburg Co. ?;. Washburn 295
Harrison v. Hoyle 266

Hart V. Seymour 32, 48, 52, 72,

149
Hartney v. Gosling 69

Hatfield v. De Long 214, 218,

224, 228
Hatt, Re 14

Haven v. Grand Junction Co. 153

V. Sibbald 169

Hawke v. Cigar Makers'

Union 313

V. Cole 276

Hawken v. Bourne 90, 126, 136
Hawtayne v. Bourne 91, 136

Hayes v. Hall 48

V. Manning 265

Heard v. March 135, 162, 168

Heater Co. v. Union 312

Heath v. Goslin 278, 280

V. N. Y. Gold Exchange 231
Hecker v. Cook 311

Heckman v. Mees 263

Heckscher v. Edenborn 185

Heiskell v. Lodge 248

XV

TABLE OF CASES

PAGE

Heisler v. Methodist Church 305
Heiss V. Vosbui'g 241

Helbig V. Rosenberg 235

Hellman, Re 211

Helm V. Zarecor 265

Henderson v. Allen 68

Hendrickson v. Shotwell 232, 233,

259

Hennessey v. Walsh 241

Henry v. Deitrick 234, 245

V. Jackson 9, 105

V. Simanton 122

Henry Disston, etc. Co., Re 23

Henshaw v. Clark 194

Hershiser v. WiUiams 219

Hess V. Johnson 272

V. Werts 130

Hetchett v. Mt. Pleasant

Church

234

Hewitt V. Green

168

V. Phelps

159

V. Storey

96

V. Wheeler

299

Hibbs V. Brown 13,

130,

131

Hickey v. Baine

223,

225

Higgins V. Armstrong

69

V. Hopkins

281

Hill, Ex parte

311

Hill V. Cornwall

151

V. Eagle Co.

291,

310

V. Rauhan Aarre

250

V. Stettler

20

Hill Estate Co. v. Whittlesey 244
Hinds V. Battin 21

Plinkley v. Blethen 122

Hitchman Coal Co. v. Mitchell 288
Hoadley v. County Commis-
sioners 40, 43, 141, 142
V. Purifoy 173

Hoagland v. Cooper 168

Hoare v. Dawes 190, 198

Hocks V. Sprague 275

Hodgson V. Baldwin 122

Hogan V. Pacific Endowment

League 271

Hogdon V. Gardner 308

Hollister v. Stewart 161

Holm V. Holm 245

Holmes V. McDonald 135

Iloloinuny v. Nat. Slavonic

Soc. 216, 226

Holt V. Blake 77, 98

V. Downs 201,261

Home Benefit Ass'n v. Wes-
ton 307
Hornlx'ck v. Wcsthrook 2'A\)
llonihcrgcr v. Orcliard 27(), 278
lloriihlouiT /'. Crandall 184

Horner v. Meyers 80, 115

Horsman v. Allen 265

Horton v. Chester Baptist

Church 234

V. Smith 265

Hosch Lumber Co. v. Weeks 167
Hoskinson v. Pusey 269

Hosman v. Kinneally 276

V. Kinneally 283

Hossack V. Development Co. 39,

112, 114

Hotchin v. Kent 124, 127

Howard v. Factory Land Co. 25

V. Luce 197

Howe V. Morse 32, 149

Howell V. Earp 91

Hoyt V. Paw Paw Grape Juice

Co. 24

Hibbard v. German Cathohc

Soc. 235, 260

Hudson V. Cincinnati Co. 282

V. Spaulding 26

V. V. N. O., etc. Ry. 282

Hulburt, Re 164

Humbert v. Abeel 309

Humphrey v. Burnside 269

V. N. Y., etc. R. R. Co. 153
Hunnewell v. Willow Springs

Co. 78, 119

Hunsberger v. Guaranty Trust

Co. 162

Hunt V. Wright 121

Huntington v. Ramsden 246

Hurd V. Darling 194

Hurley v. Hurley 195

Hussey v. Arnold 44, 125, 130,
156, 157
Huston V. Rentlinger 232

Hyde v. Stone 194

V. Woods 210

Hynes v. Lilhs 231

Imperial Brewing Co. v.

Wyman 20

Imperial Shale Brick Co. v.

Jewett 131, 175

Indorwick v. Snell 88, 93

Industrial Co. v. Texas 127, 133
Inglis V. Millersburg Driving

Ass'n 96, 99

Innos V. Wylie 215

Interstate Co. v. Brownback 22
Iron Molders Union v. AUis-

Chalrners Co. 287

Irvine v. Forbes 67

Irving V. Neal 288, 292

Isear v. Daynes 181

V. McMahon 181

XVI

TABLE OF CASES

PAGE

Jackson v. Akron Brick Ass'n 96

V. Cory 239

V. Stanfield 290

Jarrell v. Sproules 267

Jarvis v. Hatheway 275

Jenne v. Matlack 98

John A. Fry, Re 135

Johns V. Johns 167

Johnson, Re 150, 159

Johnson v. Lewis 62

V. Mayne 248

V. Welch 300

Johnson County v. Thayer 165

Jones, In re 45

Jones, Re 3, 13, 142

Jones V. Clark 89

V. Gould 7, 150, 184, 186

V. Hope 281

V. Maher 292

V. State 217

V. Towne 246

V. Watson 308

Joseph V. Davenport 105

Josey V. Union Loan & Trust

Co. 295
J. T. Parkinson Co. v. Build-
ing Trades Council 290
Judge V. Braswell • 90

Kahn v. Smelting Co. 116, 197
Kaiser v. Lawrence Savings

Bank 26

Kalbitzer v. Goodhue 252

Kearns v. Leaf 133

Keasley v. Codd 98

Kehlenbeck v. Logeman 271, 272
Keller v. Tracy 310

Kelley v. M'Namee 110

Kelly V. Illinois State Trust

Co. 185

Kelsey v. Jackson 295

Kemp V. Division No. 241 288
Kennedy v. Boykin 197

V. Hodges 83

Kentucky Lodge v. White 226
Kenyon v. WiUiams 88

Kerr y. Hicks 200, 236

Kerrison v. Stewart 165

Ketcham v. Mobile, etc. Co. 169
V. Provost 211

Ketchum, Re 210

Ketchmn v. Belding 178

Kierstead v. Bennett 26, 88

Kimball v. Lower Columbia

Ass'n 274, 310

Kimberly v. Arms 116

Kimmins v. Wilson 104

King V. Accumulative Co. 133

PAOB

King V. Nichols 312

V. Stowell 159

V. TowTishend 136

Kingsland v. Braistead 95, 103
Kingston v. Salvation Army 307

Kinkead v. McKee 306

Kinney v. Treasurer 83

Kirchner v. Smith 69

Kisor's Appeal 251

Klein v. Rand 310

Knapp V. R. R. Co. 169

Knorr v. Bates 179
KnottesviUe Co. v. Mattingly 105

Knox V. Gye 418

Koehler v. Brown 104

Konta V. Stock Exchange 209

Kopp V. White 217
Koprucki v. Wojenechowski 297

Korsted v. Williams 277

K. P. V. I. K. P. 245

Kramer v. Arthurs 80

Krause v. Sander 210, 218

Krecker v. Shirey 230

Kriegman v. Dxmphy 180

Kuehl V. Meyer 301, 304

Kuns V. Robertson 264

Kutemen v. Lacy 300

Labouchere v. Earl of Wham-

cUffe 217, 219

Ladner v. Gibbon 22

Laflin Co. v. Steytler 20

Lafond v. Deems 201, 225, 302
Lahiff V. Benev. Soc. 224, 275
Lake v. Mimford 88

Lamb v. Cain 264

Lambert v. Addison 214, 215

Lamson v. Hewell 216

Land Title & Trust Co. v. As-
phalt Co. 167
Lander v. Logan 20
V. TilUa 20
Landis v. Campbell 228, 275
Landman v. Entwhistle 281
Landrith v. Hudgins 265
Lane v. Albertson 14
V. Fenn 184
Laney v. Fickel 103
Langvein v. Tongue 176
Lathrop Haskins & Co., Re 198
Laughlin v. Greene 96
Laughton v. Griffin 134
Lavretta v. Holcombe 250
Lawler v. Loewe 290, 291, 292
V. Murphy 280
Lawrence v. Curtis 169
V. Schaefer 177
Laycock v. State 2

XVll

TABLE OF CASES

PAGE

La^^lg v. A. French Co. 23
L/D. Willcut & Son Co. v.

Bricklayers' Union 290

Leahy v. WilUams 293

Leatherman v. Wolf 240

Leavitt v. Peck 123

Le Blanc v. Lemaire 250

Lee V. Burnley 21

Lee Mut. F. Ins. Co. v. State 2

Leech v. Harris 216

Leigh V. Dickeson 197

Leiter v. Beecher 177

Lemp V. Raven 265

Lennig v. Penn. Morocco Co. 19

Leonard v. Davenport 247

Leventritt, Re 161

Levin v. Cosgrove 272

Lev>' V. U. S. Grand Lodge 225

Lewis V. McElwain 96

V. Tilton 298

V. VoUva 233

V. Watson 261
V. Wilson 217, 220
Liederkranz Societv v. Ger-

mania Turn Verein 200, 249, 309
Life Ass'n of Scotland v. Sid-

dal 48
Liggett V. Ladd 239, 309

Light Co. V. Muncey 96

Lightbourne v. Walsh 276, 278,

280
Lilly V. Tobbein 307, 308, 309

Linaker v. Pilcher 296

Lincoln v. CrandaU 298
Lindermann v. Advance Stove

Works 203
Linn v. Carson 294
Linnell v. Leon 2, 81
Lipsett V. Hassard 24
Little V. Willford 248
Littleton v. I. O. U. A. M. 232,
307, 312
Liverpool Ins. Co. v. Mass. 16
Livingston v. Lynch 92
Lloyd V. Loaring 309
V. Lynch 195
Loewe v. California, etc. Fed-
eration 290
V. Lawlor 290
Logan V. McNaugher 38
Lolisc V. Fuollc 287
London Marine Ins. Ass'n 126
Lf)ng (;. Harvey 236
Fvord V. Kquitable Soc. 154
Loubat V. Ln Hoy 222, 225
Loud V. Winchcsicr 168
Lf)Vo ;;. Blair 8
Lovejoy v. Whitconib 275

PAGE

Lowrey v. Bates 180, 181
Loy V. Alston 116
Lucas V. Case 275
V. Williams 155
Lucke V. Clothing, etc. As-
sembly 288
Luckombe v. Ashton 300
Ludlam v. Higbee 242
Lumbard v. Grant 273
Lunsford, etc. Co. v. Wren 307
LjTnan v. Schwartz 68
LjTich V. Postlethwaite 98
Lynd v. Menzies 264
Lynn v. Commercial Club 280
Lj'on V. Worcester 134
Lyons v. Planters 294
Lyttleton v. Blackbm'ne 215

McAlUster v. Hoadley 181

McCabe v. Goodfellow 281

McCain v. Smith 24
McCaUion v. Hibernia, etc.

Soc. 224

]\IcCallister v. Ross 297

McCartee v. Chambers 298
McCarthy v. Caledonia Coal

Co. 93
McConnell v. Denver 70, 92

V. Gardner 309, 310
McCord V. Thompson-Star-

rett Co. 237

INIcCready v. Thrush 181

McCreary v. Chandler 95

McDearman v. McClure 197

McDonald v. Fleming 9, 124

V. Gray 311

McDougal V. Fuller 164

McDowell V. Joice 94, 110, 111

^IcFadden v. Leeka 38

V. :\Iurphy 250

McFaddin v. Wiess 137
MacGeorge v. Chemical INIfg.

Co. 23

McGlynn v. Post 312

McGourky v. Toledo Co. 152

IMcGraw v. Bayard 164

McGrcarcy v. Chandler 299

McGinnis't). Watson 264

McGuire v. Trustees 230

Mclntyre v. Belcher 132

McKane v. Adams 214

McKeon v. Kearney 247

McKinley v. Irvine 135

McKinney v. Griggs 262

McKinnie v. Postles 299

McLain v. Matlock 275

McLaughlin v. Center Co. 22

V. Wall 250

XVlll

TABLE OF CASES

PAGE

McLean v. Tobin 178

M'Mahon v. Meehan 68

V. Rauhr 274

McMillan v. Whitlev 190
McNeal v. Market Co. 88, 96

McRoberts v. Moudy 261

McVicker v. Ross 17

McWilliams v. Willis 299

Machias Co. v. Coyle 105

Machinists' Bank v. Dean 119

Mack V. Engel 24

V. Krine 261, 265
Mackenzie v. Edinburg Board

of School Trustees 307

Macomber v. Endion Co. 25

Macon Co. v. Riggs 250

Mader v. Norman 69
Maisch v. O. A. 293, 308

Maitland v. Bramwell 275

Makin v. Sav. Inst. 44
Mallory v. RusseU 62, 80
Maltz V. American Express

Co. 14

Manderson's Appeal 160

Mandsley v. LeBlanc 98
Mann v. Butler 95, 121, 133

Manning v. Gasharie 88, 98, 124,

137
V. Klaus 222
V. San Antonio Club 215
V. Shoemaker 251
Mannix v. Purcell, 240, 241, 244
Manville v. Parks 89
March v. Romare 170
Marien v. Evangelical Con-
gregation 260
Marks v. Gates 68
Marmont v. State 252
Marshall v. Loveless 309
V. Pilot's Ass'n 271
V. Virden 233
Marsh River Lodge, F. & A.

M. V. Brooks 308
Marston v. Durgin 107
MarteU v. White 289
Martin v. Board 240
V. Dryden 95
V. Strong 275
Marx V. McGlynn 246
Mason v. Finch 302
V. Pomeroy 158
Masters v. Lander 20
Masterson v. Botts 313
Matthews v. Bliss 196
Maxwell v. McWiUiams 183
May V. May 169, 170
Mayer v. Journeymen Stone-
cutters' Ass'n 210

PAGE

Mayo V. Moritz 42, 43, 157

Mayor v. Johnson 211

Mazaika v. Krauczunas 244

Mead v. Stirling 225

Meadville Sav. Bank Estate 112

Meagher v. Reed 117

Meehan v. Valentine 69
Mendenhall, Re 26, 97

V. First Church 240

Mendeth, Ex parte 126

Merad Oil Co. v. Patterson 81

Mercantile Bank v. Lauth 22

Mercer v. Buchanan 149

Merchant Traders' Ass'n 132
Merchants National Bank v.

Wehrmann 1, 71, 102

Meriwether v. Atkin 278

Merrick v. Brainerd 115

Merrill v. Farmers' Co. 166

V. Milliken 183

Mesisco V. Guihano 222, 223

Messing v. Messing 194
Metal Stamping Co. v. Cran-

daU 94
Metropohtan Base Ball Ass'n

V. Simmons 220
Met. St. Ry. v. Adams Ex-press

Co. 16
Met. Trust Co. v. Central

Trust Co. 166
Meurer v. Detroit Musicians,

etc. Ass'n 221
Meyer v. Furnitvu-e, etc. Co. 96
Michenor v. Reinach 252
Midwood V. Wholesale Gro-
cers Ass'n 203
Miller v. New York Builders'

League 216, 217

V. Riddle 304

V. Rutland Co. 165

Mills V. State 3

Minasian v. Osborne 287

Minnett v. Lord Talbot 297

Minor v. Lodge 251

Minot V. Winthrop 142

Mitchell V. Chambers 192

V. Hitchman Co. 287

V. Whitlock 157

Mogul Co. V. McGregor 289

V. McGregor 286

Mokelumne Co. v. Knox 312

Montgomery v. Knox 95
Montgomery Ward & Co. v.

South Dak. Ass'n 289

Moody V. Flagg 133

Moon V. Flack 221

Moore v. Brink 14

V. May 77, 109

XIX

TABLE OF CASES

PAGE

Moore v. McGljTin 159

V. Stemmons 293

V. Telephone Co. 202, 207,

211, 250, 304

Moore Co. v. National Sav.

Co. 170

Morey v. Clopton 193

Morgan v. Gabard 265

V. South Co. 169

Morris, Re 160

V. Mettaline Co. 23

Morrisey v. Weed 122

Moseman v. Heitzhuzen 255

Mountcashel v. Barber 300

Moetze v. Tuteur 283

Mullen V. Beach Grove Driv-
ing Park 3
Muh-oy V. Supreme Lodge 202,
219, 225
Munford v. Brown 197
Munroe v. Colored Ass'n 217,
219, 287
Munroe County Alliance v.

Owens 212

Munsford v. NicoU 192

Murrav v. McHugh 273

V. Walker 208, 276

Mutual V. Reser 95, 96

Mutual Life Co. v. Imnan

Parks Church 307

M. W. Powell Co. i;. Finn 109
Myers v. Jenkins 281

Myrick v. Dame 103

Nachtrieb v. Harmony Set-
tlement 253
Nakegawa v. Okamoto 297
Nance v. Busby 208, 214, 258,

309
Na.sh V. Sutton 241

Nashua Bank v. Abbott 211

Natchez v. Minor 88

National Ass'n v. Cummings 288
National Bank v. Van Der-

werker 19

V. Dulaney 164

National Fireproofing Co. v.

Mason's A.ss'n 289

National Parks Bank v.

Nichols 109

Nay V. Scranton Trust Co. 161
Near ?;. Donnelly 192

Neil! V. Spencer 276

Nelson V. Drake 19

New V. Nicholl 155, 159

Newell V. Borden 91, 276

New JfTsey, etc. Works v.
Ackennan 178

New Sombrero Co. v. Erlanger 99
Newton v. Ralfe 160
N. Y. Bank v. CroweU 110
N. Y. Board of Fire Under-
writers V. Whipple 175
Niagara County v. People 2
Nichols V. Buell 25
Nielson v. Gross 69
Nightingale v. Barney 307
Nisbet V. Nash 122
Niven v. Spickerman 104
Nolan V. Lovelock 90
Nolan V. McNamee 98
Norris, In re 190
North Church v. McGowan 245
Norton v. Phelps 159
Norwood V. Francis 107, 110
Novicis V. Krauczunas 244
Nunn V. Louis viUe 308

O'Bierne v. Allegheny Co. 166

O'Brien v. Grant 128

V. Musical Union 227

O'Connell v. Lamb 308
Odell V. Boyden 210, 211

Odiorne v. Maxey 88

O'Donaghue v. McGovern 275

O'Hear v. De Goesbriand 246

Ohver v. Hopkins 225

V. Liverpool & London

Co. 16
Ohver 's Estate 81, 92
Opinion of Attorney General,

re License 177

Opinion of the Justices 143

Opinion of the Justices 296

Orleans, The, v. Phoebus 197

O'Rourke v. Kelley 207

Orr V. Yates 162

Osborne v. Dickey 298

V. Holland 2

Osceola Tribe v. Schmidt 216
Ostrom V. Greene 202, 236, 303
Otto V. San Francisco, etc.

Union 221

Overton v. Hewett 276

Owens V. Caraway 295

V. Methodist Soc. 247

P. V. N. Y.

219

Pafldock V. Brown

276

Page V. Edmunds

210

Park V. Spaulding

279

Park Co. V. Kelly Co.

22

Parker v. May

201

309

V. Oliver

252

Parks V. Trust Co.

304

Parmenter v. Barstow

157

XX

TABLE OF CASES

PAGE

Parrott v. Eyre 98

Patch Mfg. Co. V. Capeless 202,

281
Paton V. Clark 136

Patrick v. Weston 117

Patterson v. Tidewater Co. 23
Payne v. Lodge 309

V. Snow 285

Peabody v. Eastern Methodist

Soc. 243, 244

V. Germain 178

V. Treasurer 81, 83, 142

Peace v. Christian Church 259
Pease v. Pease 3

Peckham v. Wentworth 312

Peckner v. Webb 16

Penfield v. Skinner 305

Pennington v. Met. Museum

of Art 167

People ex rel. Winchester v.

Coleman 13

People V. Brander 3

V. Chicago Board of Trade 232
V. Coachman's Union

Benev. Soc. 219

V. Coleman 3

V. Feitner 211

V. Loew 182

V. Manhattan Chess Club 217
V. North River Co. 28, 40
V. North River Sugar Re-
fineries 315
V. Rose 2
V. Wemple 14
V. Young Men's, etc. Soc. 219
Perkins v. Siegfried 309
Permanent Committee v. Pa-
cific, etc. Church 265
Perrin v. Lepper 162
Perry v. Granger 194
V. Hale 26
V. Tupper 209
V. Wheeler 230
Peterson v. Beggs 69
V. Chicago, etc. Ry. Co. 56
V. Samuelson 209
Philadelphia Baptist Ass'n

V. Hart 247

Phillips V. Blatchford 40, 41, 43,

118, 119, 132

V. Jones 117

Philomath College v. Wyatt 265

Phipps V. Jones 201

Phoenix Ins. Co. v. Biirkett 299

Pickett V. Walsh 286, 288, 289,

290, 292, 307, 308, 310

Pierson v. Gardner 303

Pillgrem v. Pillgrem 158

PAGE

Pipe V. Bateman 309
Pirics V. First Russian Soc. 202,
221, 223, 303
Pitcher v. Board of Trade 216
Pittsburg Co. v. Reese 22
Pittsburg Wagon Works Es-
tate 80
Plant V. Woods 288
Piatt V. Colvm 15
V. Jones 210
Pomeroy v. Latting 88
Pooley, Re 164
Pooley V. Driver 11
Porter v. Pittsburg Co. 55
Potter V. Search 232
V. Thornton 259
Poultney v. Bachman 231, 272
Pounder v. Ashe 214
Powell V. Waldron 211
Powell Co. V. Finn 95
Powers V. Budy 228
V. Journeymen 292
Powhatan Steamboat Co. v.

Potomac Steamboat Co. 312
Poynter v. Phelps 262
Pratt V. McGuinness 78
V. Roman Catholic Or-
phan Asylum 247
Predestinarian Church v.

United Church 260
Presbyterian Church v. Don-

nom 259

Prickett v. Wells 243

Primm v. White 202, 302

Pringle v. Dorsey 306

Printers', etc. Soc, Re (1899) 304

Prinz V. Lucas 158
Professional Life Assurance

Co., The 132
Professional Life Assurance

Co., Re 35
Pullman Car Co. v. Missouri

Pacific Ry. Co. 55

Purdy V. Lynch 162

Putnam v. Wise 194

Queen v. Robson

200

Quimby v. Tapley

91,

136

t). Uhl

151

Rabb V. Trevelyan

217,

224

Raggett V. Bishop

270

V. Musgrove

270

Railli V. TMiite

179,

180

Ramell v. Duffy

226

Ramsey v. Hicks

265

Ramsey's Appeal

258

Randall v. Meredith

90

XXI

TABLE OF CASES

Randolph v. Xichol

PAGE

122

Roberts v. Hill

PAGE

311

V. Southern Beneficial

Robertson v. Walker 202

251

League

227

Robinson v. Robinson 299,

308

Ranken v. Probev

98

V. Yates

223

Ratchffe v. Sangston

168

Robinson's Settlement, Re

157

Rav V. Powers

276

RockweU V. Dewees

195

RaVbould. Re (1900) 159,

160

Rodgers v. Bennett

258

Raych v. Hadida 218,

275

Rodgers Printing Co. v.

Ra\Tnond v. Colton 1.

5, IS

Santa Claus Co.

23

Redgate v. Roush

275

Roger Wilhams Bank v.

Reding v. Anderson 239,

244

Groton Co.

155

Redington v. Chase

194

Rogers r. Pell

170

Redway v. Sweet

202

Roofing Co. V. Int. -\ss'n 203

310

Reed v'. St. Ambrose Church

241

V. Jose

291

Reeve v. Parkins

303

Roper V. Burke

304

Reeves v. Reeves

247

Rorke v. RusseU

17

Reformed, etc. Church v.

Roschi's Appeal

258

Xott

245

Rosenthal v. Reinfeld

314

Regina i'. Robson

9

Rountree v. Blount

297

Rehfuss V. Moore

20

Rom-ke v. Drug Co. 288

312

Reid V. Allan

132

Rouse r. Detroit Cj'cle Co.

24

Remington v. Congdon

275

Rousseau v. Call

270

Reorganized Church v. Church

Rowe V. Hewitt

223

of Christ 244,

267

Ruddy v. L'nited Ass'n

295

Re\-neU v. Lewis 26, 27

Rudolph V. Southern Benefi-

Rhinelander i'. Farmers Co.

161

cial League 232,

297

Rhoads r. Fitzpatrick

278

Ruhl V. Ware

312

Rhodes v. Maret

311

Runkle v. Biurage

188

Rhodes Bros. Co. v. Musi-

Ruse V. Wilhams

253

cians' L'nion

293

Russie I'. BrazzeU

264

Rianhard v. Hovev 91,

109

Rice V. Rockefeller 115, 315

318

S. V. Live Stock Exchange

308

Richards v. Bartram

296

St. James Club, Matter of

276

V. Merrimack Co.

170

St. John's Church v. Hanns

246

Richardson, Ex parte

150

St. Louis Ry. v. Thompson

224

Richardson v. Francestown

St. Marj^'s Benev. Ass'n i-.

Union Cong. Soe. 210, 235

L^-nch 298,

301

V. Harsha

2

St. Paul's Church v. Hower

234

V. Hastings

308

Saksman v. Shuhz 17, 91

103

Richmond v. Judj^ 200,

280

Sanchez v. Grace M. E.

V. Pinnix

25

Chvu-ch

244

Richmond Cedar Works v.

Sanders v. Baggerly

265

Buckner

176

V. Edhng 17

103

Richter v. Kabat

251

Sandford v. Halsey

104

Rickart i'. People

213

V. Super\'isors

14

Rickcr t-. American Loan &

San Francisco v. Anderson

211

Trust Co. 41, 43, 141,

153

Sangston v. Gordon

243

Ricketts i-. Bennett

136

Santa Clara Mining Ass'n v.

V. Bennett

90

Quicksilver Mining Co.

95

Ridgely v. Hobson

280

Satterlee v. Wilhams

229

Riffe V. Proctor 276, 281

298

Saunders v. Adams Express Co. 3

Rigby V. Connol

214

V. Am. Express Co.

312

Riggs V. Swann

129

Savage v. Putnam

111

Riley V. DiggH

247

Savannah Cotton Exchange

Robbin.s V. Butler 99, 108

109

V. State

222

f. Waldo Lodge

273

Sawyer v. Baldwin

314

r. Wells 16. 17

Schiller Commander^- Xo. 1,

Robbin.s Co. v. Weber

21

U. F. M. r. Jaennichen

250

XXll

TABLE OF CASES

PAGE

Schlichter v. Keiter 264

Schmidt v. Gunther 307

Schneider v. Local Union 216,
224, 226
Schnorr's Appeal 258

Schouten v. Alpine 224

Schradi v. Dornfeld 263

Schultze V. Van Doren 166

Schumacher v. Sumner Tel.

Co. 9, 276, 277

Schwartz v. Duss 253

V. Welcher 312

Schweicher v. Husser 229

Scott V. Clark 123

V. Rand 48

Seaboard Fire Underwriters,

Re 2, 66, 172

Seattle Co. v. Hansen 307

Settembre v. Putnam 117

Sewall V. Breathitt Lodge 282

Sewell V. Ives 210

Sexton V. Graham 193

Shaker Soc. v. Watson 294, 298
Shamburg v. Ruggles 109

Shannon v. Frost 262

Sharp V. Bonliam 265

Shaw V. Norfolk County

R. R. Co. 165

Shaw, Kendall & Co. v. Brown 24
Shearer v. Shearer 79

Sheble v. Strong 20

Sheehy v. Blake 277, 278

Shepard v. Jacobs 52

Sherard v. Walton 265

Sherry's Appeal 216

Sherwood v. Am. Bible Soc. 247
Shipwright's Ass'n v. Mitchell 250
Shirk V. Lafayette 169

Shoe, etc. Bank v. Dix 130, 157
Shurtleff v. Parker 275

V. Stevens 275

SickeLsteel v. Edmonds 104, 106
SiddaU, In re 45

Siebert v. Minn. Co. 166

Siff V. Forbes _ 276, 278

Simmons v. Alhson 264

Simpson v. Ritchie 104

Sizer v. Daniels 276, 281

Skilhnan v. Lachman 92, 117, 129
Skinner v. Shew 286

Slater v. Haas 110

Slaughter v. American Bap-
tist Missionary Society 97, 207
Small V. Atwood 95

V. Cahoon 235

V. Federation 307

Smith V. Anderson 44, 48, 58, 71,

73

Smith V. Charles

251

V. Fagan

106

V. Goode, etc. Co.

295

V. Hall Glass Co.

126

V. Hollis

216

V. Hollister

209

V. Kinney

190

V. Kerr

304

V. Nelson 235, 248, 309

V. Pedigo 260, 267

V. Pinney 309

V. Swormstedt 310

V. Virgin 112

V. Wilhams 152

Snow w. Hazelwood 11

V. Wheeler 288, 309

Snowden v. Crown Cork &

Seal Co. 249

Snyder v. Lindsey 17

V. Lindsey 135

Soller V. Mouton 307

South Society v. Crocker 240

South Wales Federation v.

Glamorgan Co. 296

Southern Steam Packet Co.

V. Magi-ath 27

Southworth v. Smith 194

Sovei-eign Life Assurance Co. 132
Sparhawk v. Yerkes 210

Speidell v. Henrici 253

Spence v. Whitaker 108

Spenglar v. Kuhn 167

Spier V. Hyde 189

Spottswood V. Morris 39, 92, 121
Spraker v. Piatt 19

Spring Green Church v.

Thornton 242

Spies V. People 287

Stanton Iron Co., Re 152

Staples V. Hobbs 211

Starkweather v. Jenner 195

State V. Ackerman 173

V. Adams Express Co. 15

V. Alley 174

V. Baseball Ass'n 221, 223

V. Bienvenue 275

V. Brown 166

V. Cook 275

V. Cummins 214, 223

V. Grand Lodge 226

V. Johnson 169

V. McPhail 211

V. Medical Soc. 218

V. Mercer 213

V. Piatt 164

V. Standard Oil Co. 28, 40,

154, 315, 318

V. Steele 2

XXlll

TABLE OF CASES

State V. Stone

PAGE

174

Taylor v. Mahoney

PAGE

169

V. Trustees

23.5

V. Salmon

95

V. V. S. Express Co.

15

Teague v. Corbitt

164

V. Warren

247

Teed v. Parsons 9, 200,

277

V. Williams

237

Temple v. Vincent

239

State ex rel. Hoadley

V.

Tenney v. N. E. Protective

Board of Ins. Com-

Union 39, 110

115

missioners

177

Thomas, In re

45

State Fii-e Ins. Co.

132

133

Thomas v. Clark

109

Staver Co. v. Blake

24

V. Dakin

2

Steele v. Gourlev

301

V. EUmaker 251,

302

Stemmerman v. Lilienthal 302, 310

Thomas Russell & Son v.

Stems Co. v. Williams

152

Stampers', etc. Union 290

292

Stevens v. Thompson

197

Thompson v. Adams 210

211

Stewart v. White

239

V. Cathohc Congrega-

Stieghtz V. Belding

178

tional Soc.

231

Still V. Holbrook

122

V. Colonial Assurance Co.

175

Stimson v. Lewis

107

V. Garrison

276

Stockdale v. Maginn

106

Thorndike v. De Wolf

192

Stogner v. Laird

261

Thurmond v. Cedar Springs

Stone V. Textile, etc. Ass'

n

203

Baptist Church 200, 277

307

Storebe v. Albert

3

Tide Water Co. v. State

Stradley v. CargiU Co.

93

Board of Assessors

15

Strang v. Osborne

107

193

Tidewater Pipe Co. v. Kitch-

Stratton v. European Co.

161

enman

22

V. European R. R.

157

V. Satterfield

92

Strauss v. Thoman

279

Tindel v. Park

21

Straw V. Murray

23

Todd V. Emly

300

Strebe v. Albert

13

Torrey v. Baker

301

Strempel v. Rubing

225

Tctt-nsend v. Golwey

105

Strickland v. Prichard

304

Tracy v. Banker

313

V. SjTnons

1.59

Tradesman's Bank v. Astor

124

Stringham v. Durkee

88

105

Travers v. Abbey

230

Strong V. Growers' Ass'n

209

Tredwen v. Boiu-ne

90

V. Harvey

202

Trowbridge v. Scudder

26

Stuart V. Adams

91

Troy Iron, etc. Factory v.

Sturges V. Knapp

1.54

Corning

115

Sullivan v. Campbell

128

True Reformed Church v.

Sumner v. Piza

181

Iserman

259

Swaine v. Miller

227

Trust, etc. Co. v. Waldhauer

237

Swan V. Davenport

1.35

Trustees v. HenscheU

214

Swartwout v. Evans

194

V. Proctor

234

Sweeney v. Hugh McLaugh-

V. Seaford

261

lin Soc.

220

V. Sturgeon

259

Swoope V. Wakefield

108

115

V. Trustees

248

Sykes v. Beedon

12

Tschetinian v. City Trust Co.
Turner v. Sawyer

161
196

Tabor v. Breck

119

132

Turpin t'. Bagley

234

Taff Vale Ry. Co. v. Amal-

Tyler v. Galloway

15

gamatffi Soc.

296

TjT^othetae v. Union

307

Taft r. Warrl

15

V. Union

203

Tanner r. Rankon

233

Tyrrell v. Washburn 8, 37

38,

Tiiranto, Tlic

97

110, 118

124

'J\-irb<-ll r. C.ilTord

209

Tyser v. Shipowners' Syndicate

176

Taylor r. lialdwin

197

Ty.son v. Applegatc

166

(;. C;i.stl(!

91

V. Davi.s

130

1.55

Ubhoff i;. Brandenburg

168

i;. lOdson

200

Ulmer v. Muoster

271

TABLE OF CASES

Unangst j;. Shortz 243, 251

Underwriters v. Johnson 21G

V. Mercantile Co. 308

Union v. Barnes 310

Union Invest. Ass'n v. Lutz 250
Union Land Co. v. Gwynn 184
Union Trust Co. v. Oliver 162

V. Van Schaick 184

United Press Co. v. AbeU Co. 98,

102
United States v. Adams Ex-
press Co. 3, 14, 140
V. Gomez 292
V. State of N. Y. 163
V. Trinidad Coal, etc. Co. 2
Unterberg v. Elder 180
U. O. A. D. V. Mullen 304

Van Aerman v. Bleistein 3, 13, 16
Vandever's Appeal 168

Van Horn v. Corcoran 20

Van Home, Re 244

Van Home v. Fonda 195

Van Houten v. Pine 293, 303, 310,

311
Van Sanden v. Moore 111

Vasconcellos v. Ferraria 263

Vattier v. Roberts 109

Venable v. Coffman 269

Villas y. Farwell 104, 118

Virginia Co. v. Fisher 166

Volger V. Ray 276

Von Arx v. San Francisco

Verein 215, 222

Von Sclimidt v. Huntington 95,

121
Vredenburg v. Behan 283

Wachtel v. Noah Widows',

etc. Soc. 219, 222

Wadsworth v. Duncan 98, 108,

109, 110, 112

Waite V. Merrill 253

Walburn v. Ingilby 124

Walker v. Beecher 180

V. Keystone Co. 22

V. Ogden 105

V. Wait 103

Wall V. Thomas 137

Wallace v. Hughes 265

V. People 249

V. Trustees of General

Assembly 231

Wallingford Co. v. Fox 105

Walworth v. Holt 95

Ward V. Brigham 26, 191

V. Davis 134

V. Ward 197

PAGE

Warfield Howell Co. v. Wil-
liamson 176, 182
Waring v. Cram 94
Warnebold v. Grand Lodge 218
Warner v. Beers 96, 131
Warren v. Pazolt 162
V. Pim 154
V. Stearns 270
Warthe v. Radde 106
Washbon v. Hixon 297
Washburn v. Acome 246
Waterbury v. Merchants Co. 14
Waterford Y. M. C. A., In re 247
Waterlow v. Cotton 279
Watson V. Avery 267
V. Garvin 214, 217, 262
V. Jones 257, 261, 268
V. Scranton Trust Co. 161
Waugh V. Andel 311
Weaver v. Fisher 48
V. Trustees, etc. Canal 96
Webb V. Drake 287
V. Vt. Cent. Ry. Co. 166
Webster v. Vanderventer 243
Weed V. Ciuning 176
Weir V. Met. St. Ry. 16
Weiss V. Musical Union 219, 225,

226

Weld V. May 200, 240

V. Ohver 194

W^eUs V. Gates 38, 98, 135

V. Murray 119

V. Turner 281

V. Wilson 109

Wells-Stone Mercantile Co.

V. Grover 152

Werner v. Leisen 121

W^estbrook v. Griffin 310

Westcott V. Fargo 14, 17, 103

Western Penn. Hospital v.

Mercantile Co. 167

Wheelock v. Chapman 180

\^Tieelwright v. St. Louis Co. 167
While V. Damon 220

Wliipple V. Parker 26

Whitcomb v. Smart 311

White V. BrowneU 200, 217, 225,

250

V. Howard 247

V. Parks 282

Whitehouse v. Sprague 102

White Lick, etc. Friends v.

WTiite Lick, etc. Friends 259
Whitman v. Porter 41, 43, 122,

123

Whitney v. Backus 19

V. Mayo 309

Whitty V. McCarthy 233

XXV

TABLE OF CASES

PAGE

Wicks V. Nedrow 268

Wiggin V. Knights of Pythias 272

Wilhehn v. Byles 151

Wilkinson v. Evans 22

Willard V. WiUard 197

Willcox V. Arnold 278

WiUiams v. Boston 42, 43, 52,

72, 141, 316, 329, 342

V. Church 242

V. Johnson 47, 59, 316, 317,

342

V. Michigan Bank 95

V. Milton 47, 49, 62, 72, 76,

316, 317, 342

Williamson v. Randolph 219

Willis V. Chapman 28, 91, 119,

121

V. Greiner 92

V. Sharp 160

Wilhner's Estate, Re 3, 14, 142

Willoughby v. Hildreth 9

Wilson V. Curzon 26

V. Ohver 111

Wmdham v. Ulmer 260

Windley v. McCliney 234

Winona Lumber Co. v. Church 276

Winslow V. Minn., etc. R. R. 165

Winter v. Hamm 312

Winthrop v. Att'y Gen. 167

Wise V. Perpetual Trustee Co. 271,

274, 277

Witherhead v. Allen 17

PAGE

Witmer v. Schlatter 130

Witthaus V. St. Thomas

Church 246

Woddrop V. Weed 158, 160

Wolfe V. Linestone Coimcil 243,

281
Wood V. Finch 276, 280

V. Wood 220

Woods V. De Figaniere 14

Worcester Company, Re 136

Worcester Corn Exchange

Company's Case 93, 126

Workingmen's Bank v. Con-
verse 307
Wright V. Railroad 157, 158
V. SwajTie 82
Wright's Estate 161
Wylly V. Collins 160

Yarj-an Co. v. Penn. Glue
Co. 22

Yeaman v. Galveston City
Co. 106, 137

Yeaton v. Somersworth
Grange 230

York V. Pease 275

Young V. Haviland 166

Zehnbar v. Spillman 164
ZiUifax V. I. O. F. 225
Zonne v. Minneapohs Syndi-
cate 71

XXVI

UNINCORPORATED
ASSOCIATIONS

CHAPTER I

INTRODUCTION

§ 1. Definition

The term " association" has not acquired a technical
legal meaning which can safely be stated in the form of
a definition. In the philosophy of the law it has been
used sometimes to describe all cohesive groups of in-
dividuals whether or not endowed by the State with
the conception of artificial entity. Regardless of the
theoretical soundness of this terminology/ in entitling
a book devoted to unincorporated groups long usage
seems to require the addition of the limiting participle
to the word "association." The word ''voluntary"
which has been most often employed for this purpose
seems inappropriate in this connection in modern Eng-

1 "Philosophy may have gained by the attempts in recent years to
look through fiction to the fact and to generalize corporations, partner-
ships and other groups into a single conception. But to generahze is
to omit, and in this instance to omit one characteristic of the modern
corporation as called into being under modern statutes that is most
important in business and law. A leading purpose of such statutes
and of those who act under them is to interpose a non-conductor through
which in matters of contract it is impossible to see the men behind."
Holmes, J., in Donnell v. Herring Co., 208 U. S. 267, 273, 52 L. ed.
481, 28 S. Ct. 288. See also Merchants National Bank v. Wehrmann,
202 U. S. 295, 300, 50 L. ed. 1036, 26 S. Ct. 613, and "The Law of
Associations, Corporate and Unincorporate," Herbert A. Smith, Ox-
ford, 1914.

1

§ 1] INTRODUCTION [Chap. I

lish, for incorporators act under no compulsion. Hence
the words ''unincorporated associations" will be used
herein.

As used in statutes the word ''associations" has been
held to include both incorporated and unincorporated
groups.^ When used in statutes in connection with the
word "company" the words have sometimes been
held sjTionymous.^ In interpreting other statutes the
word has been held to mean something different from
a corporation ^ and again something distinct from a
partnership.^ Apart from interpretations of statutes
not particularly concerned with this distinction most
courts formerly held that in business enterprises there
is no intermediate stage between partnership and cor-
poration.^ In more recent cases a tendency seems

2 U. S. V. Trinidad Coal, etc. Co., 137 U. S. 160, 169, 34 L. ed. 640
11 S. Ct. 57.

3 Lee Mut. F. Ins. Co. v. State, 60 Miss. 395, 398.

* State V. Steele, 37 Minn. 428, 430, 34 N. W. 903. See also Adams
Express Co. v. Schofield, 111 Ky. 832, 836, 64 S. W. 903.

A statute providing for sale of pledged shares of corporations was
held not to apply to shares of unincorporated associations (real estate
trust). Linncll v. Leon, 206 Mass. 71, 91 N. E. 895.

6 Laycock v. State, 136 Ind. 217, 228, 36 N. E. 137; Base Ball Assoc.
V. Chib, 75 N. Y. S. 1076; Richardson v. Harsha, 22 Okla. 405, 420, 98
Pac. 897; Osborne v. Holland, 1 Tex. App. Civ. Cas., § 1087.

So in interpreting the words "unincorporated company" in the
United States Bankruptcy Act it was held that an involuntary peti-
tion might be filed against a Lloyds Insurance Association as such.
Re Seaboard Fu-e Underwriters, 137 Fed. 987 (D. C. — N. Y.). The
same rule was applied to a real estate trust. Re The Associated Trust,
222 Fed. 1012 (D. C. — Mass.).

« People V. Rose, 219 111. 46, .59, 76 N. E. 42; Thomas v. Dakin, 22
Wend. 9, 69; Niagara County v. People, 7 Hill .504, .507.

The rule that for purposes of jurisdiclion of courts of the United
States a suit by or against a con)()rat,ioii in its c^orjiorate name is con-
clusively presumed to b(! against citizens of th<> State creating the cor-
poration is not a])i)li(!d to joint stoc^k c()mi)aBies organizcnl under the
Htatute of New York. Chapman v. Barney, 129 U. S. 677, 682, 32 L.
ed. 800, 9 S. Ct. 426; or limited j)artnerslii]) associations organized
under the Ht!itut(i of PenriHylvjiniii. (Ireat Soutliern Co. v. .Jones, 177
U. S. 449, 4.54; 44 L. cd. 842, 20 S. Ct. 690. See post, § 12, note 14.

2

Chap. I] DEFINITION [§ 1

discernible towards establishing such an intermedi-
ate organization.^ When associations have been
regulated by statute, courts have had much diffi-
culty in distinguishing them from corporations.^ The
term has been applied to small as well as to large
groups of individuals, but it is usually and most
properly applied to many persons acting together
through officers or agents in the prosecution of im-
portant enterprises.^

7 See § 12, note 5.

^ "Family" of Shakers apparently mcorporated by peculiar statute.
Pease v. Pease, 35 Conn. 131.

An association filing articles under a statute regulating voluntary
associations became a corporation and could sue as such on a subscrip-
tion contract. Mullen v. Beach Grove Driving Park, 64 Ind. 202,
206.

Indictment defective that alleged larceny from the American Ex-
press Company without alleging it was a corporation or an association
formed under the statute making it so far an entity that it can hold
property or alleging the names of partners. People v. Brander, 244
111. 26, 31, 91 N. E. 59.

Adams Express Company held to have enough of the quaUties of
a partnership to subject it to hability in New Jersey as an unincor-
porated association. Saunders v. Adams Express Co., 71 N. J. L. 520, 58
Atl. 1101. See U. S. v. Adams Express Co., 229 U. S. 381, 390, 57 L. ed.
1237, 33 S. Ct. 878.

"A corporation has artificial entity; a joint stock company, though
it has some of the rights of corporations, cannot exist as an entity dis-
tinct from its members." "Even if, unUke a partnership which it
really is, it can be said to exist as an artificial being, it owes its exist-
ence not to the State but to the contract of its members and may be
said to exist wherever it does business or owns property. In that
sense the analogy to a corporation is to one organized under the laws
of two or more States." Re Wilhner's Estate, 138 N. Y. S. 649, 153
App. Div. 804.

"It is a quasi corporation. Its members are not partners." Storebe
V. Albert, 1 N. Y. City Court, 376.

"A partnership with some of the powers of a corporation." Van
Hernan v. Bleistein, 102 N. Y. 360, 7 N. E. 537; People v. Coleman,
133 N. Y. 279, 31 N. E. 96.

Shares in a joint stock association owned by a deceased resident of
New York are personal property and taxed at full value though part
of the assets of the association was real estate which if it had descended
to the heirs of the deceased would have been exempt. Re Jones, 172
N. Y. 575, 65 N. E. 570. See § 9, note 2.

9 Mills V. State, 23 Tex. 295, 304.

3

§ 2] INTRODUCTION [Chap. I

One reason for the uncertainty of the courts is the
fact that the term is applicable to two very different
sorts of groups as will appear from the following at-
tempt at classification.

§ 2. Classification

Individuals acting in groups without a charter of
incorporation from the State may be classified as those
whose purpose is pecuniary profit and those whose
purpose is not pecuniary profit. They may also be
divided into those groups in which there is the element
of association or cooperation and those in which the
units in the main act individually. These two classifi-
cations are not mutually exclusive, nor are their char-
acteristics sharply defined. Indeed, considering the
early period at which these questions began to come
before the courts, the rules of law applicable to all such
groups are still surprisingly vague. Classification along
the lines above indicated will aid, however, in syste-
matizing the law. The following is an attempt at such
classification:

I
Groups classified according to pecuniary purpose.

A. Those whose object is profit.

1. Associations for Profit or Partnerships.

(a) Informal Associations.

(b) Mining Partnerships.

(c) Statutory Joint Stock Associations.

(d) Defective Incorporations (in most

States) .
Co) Formal Associations.

2. Trusts.

4

Chap. I] LAW APPLICABLE [§ 3

3. Unassociated Groups.

(a) Dealers through a Common Agent.

(b) Syndicates Underwriting Securities

(usually) .

(c) Lloyd's Insurers (usually).

(d) Defective Incorporations (in some

States) .

(e) Tenants in Common.

B. Non-Profit Associations.

1. Social Clubs.

2. Fraternal Orders.

3. Benefit Societies.

4. Temporary Local Organizations.

5. Religious Societies.

6. Professional Societies.

7. Farmers' Telephone Lines.

8. Socialistic Communities.

9. Stock Exchanges.

10. Trade Unions and Employers' Associations.

II

Groups classified according to cohesion.

C. Those which have the element of association.

No. 1 of Group A, supra, and all of B.

D. Those without an element of association.

No. 2 and No. 3 of Group A, supra.

§ 3. Law Applicable

The problem with reference to all of these groups
is the application to them of principles of law origi-
nally developed with respect to relations between two or
three individuals, in the first class the law of partner-
ship, in the second class the law of trusts, in the

5

§ 3] INTRODUCTION [Chap. I

remaining classes the law of agency. Corporations,
having been recognized from the start as possessing
individuality under the fiction of artificial personality,
were able to develop a law very much their own. Un-
incorporated groups have developed hampered by
rules of law which seem logically applicable, yet rules
which had been formulated with slight regard to the
problems presented by individuals in the aggregate.
The ingenuity of modern draftsmen has done much to
reUeve unincorporated groups of legal restrictions
hindering their growth, but these documents themselves
have created new conundrums as yet unanswered.

As previously stated a distinct tendency is notice-
able both in statute and decision to treat associations
for profit as organizations intermediate between part-
nerships and corporations. Such classification will tend
to develop for them a law of their owti. Though to some
extent these dicta have been due to loose reasoning,
statutory recognition of the situation gives to the more
recent of them a position of authority. The importance
of the interests involved in these modern cases seems to
justify fully the classification which we see developing.

Another attempt by the courts, encouraged by the
digesters, to create a new legal relation is the use in
recent cases of the term ''joint adventure." In almost
every instance where this term has been applied the rela-
tion in fact was that of partnership and the court has
applied the ordinary rules of partnership called for by
the facts though using this new term as though the
relation was not that of partnership. So far as the
courts seem to have had a distinction in mind they
have applied this term to partnerships formed to en-
gage in a single transaction instead of in a series of

6

Chap. I] MODERN TENDENCIES [§ 4

transactions such as constitute the business of an
ordinary commercial partnership. These cases have
usually involved only a few individuals and so do not
particularly concern this treatise. In an important
recent decision, however,^ the term has been applied
to a syndicate of numerous members of the sort that
has frequently been held a partnership. In the case in
question the syndicate was held not a partnership but
a "joint venture" and the court expressed an inclina-
tion not to apply to it all the ordinary rules of part-
nership. It would seem that the court had in mind
either the sort of relation which is herein described as
an Unassociated Group or what was really a Trust.^

§ 4. Modern Tendencies
One of the surprises of recent law has been the re-
flection in the decisions of the courts of a revival of in-
terest among business men in unincorporated associa-
tions. Taxation and inquisitorial legislation affecting
corporations has driven many concerns to what might
seem a more primitive form of business organization.
In certain States, notably Massachusetts, where local
legislation of long standing had forced such develop-
ments earlier than elsewhere, these associations have
been developed to a high degree of effectiveness. The
attention attracted by their success foreshadows a
similar tendency in other States. The newest law to-
day concerns the application of old principles to the
new problems created by associations for profit. It
seems well, therefore, to begin by a consideration of
the nature of this form of group, its distinction from
other similar groups and the law applicable to it.

1 Jones V. Gould, 209 N. Y. 419, 424, 426, 103 N. E. 720.

2 See § 50, note 3.

7

CHAPTER II

ASSOCIATIONS FOR PROFIT

§ 5. Early Companies

Associations for profit or partnerships take differ-
ent forms according as they have developed from
different sources. One of the earhest forms was the
large trading partnership with transferable shares
which was the direct progenitor of the modern busi-
ness corporation.^ These grew out of small part-
nerships and were treated as partnerships from the
start. The consequences to the holders of these
shares of the failure of speculative ''bubbles" and
the subsequent restrictive legislation^ led for a time
to their abandonment and caused the substitution
of corporations.

§ 6. Informal Associations for Profit

A primitive kind of association for profit is that de-
veloped from the social club, the somewhat informal
organization with constitution and by-laws setting
forth the mutual rights and obligations of the members.^
What makes such groups partnerships, unlike their
progenitor, the social club, is their purpose, viz., the

• " Whore men associate themselves together and conduct a general
business under a common name and do not incorporate the association
uriflcr tlif laws of tlio State, they may be deemed partners." Love v.
lilair, 72 Ind. 2S1, 2S2.

2 In I':nKland, the so-called "Bubble Act." 6 Geo. I c. 18.

' Tyrrell v. Washburn, 6 Allen 466; Ashley v. Dowling, 203 Mass.
311, 317, 8'J N. K. 434.

8

Chap. IIJ INFORMAL ASSOCIATIONS FOR PROFIT [§ 6

pecuniary gain of the members in some sort of busi-
ness.^

During the middle of the last century a craze seems
to have swept the United States for the organization
of cooperative stores, chiefly among farmers wholly
unacquainted with store-keeping. The vicissitudes of
these organizations furnish many decisions on the
application of the law of partnership to associations.^
Communistic societies are properly held non-profit
associations, but in one case the Supreme Court of the
United States referred to one as a partnership.^ Farm-
ers' telephone lines are a recent variety of cooperative
organization, usually of the most informal character.
They are usually and, it is submitted, properly held
non-profit associations, but one such association was
held not a commercial partnership, but a non-trading
partnership.^ The law relating to non-profit associa-
tions is discussed hereafter in Chapter V.

2 Regina v. Robson, L. R. 16 Q. B. D. 137.

' "Their constitution is quite full and minute in establishing rules
fit for a debating society, but wholly silent upon points the most vital
to their pecuniary welfare." Henry v. Jackson, 37 Vt. 431.

A cooperative store was held not a partnership, and hability of mem-
bers was held to depend on the principle of agency. Davison v.
Holden, 55 Conn. 103, 112, 10 Atl. 515.

What seems to have been a cooperative store was held not a partner-
ship "as between themselves" because they understood their habihty
was hmited to their subscriptions. McDonald v. Fleming, 178 Mich.
206, 144 N. W. 519.

Evidence held insufficient to show that a Farmers' League owned a
cooperative cash store. Willoughby v. Hildreth, 182 Mo. App. 80, 167
S. W. 639.

* Goesele v. Bimeler, 14 How. 589, 607. See contra, Teed v. Parsons,
202 111. 455, 460, 66 N. E. 1044. See § 54, note 7.

^ In which partners have no impUed power to borrow on the credit
of the fii-m. The court, however, proves the unsoundness of its own
reasoning by treating social clubs and lodges as in this same class.
Schumaker v. Sumner Tel. Co., 161 la. 326, 142 N. W. 1034. See § 54,
note 8.

§ 7] ASSOCIATIONS FOR PROFIT [Chap. II

§ 7. Mining Partnerships

One form of partnership which has seldom been rec-
ognized as a true association, but treated rather as an
isolated exception to the rules of ordinary partner-
ship, is the so-called ''mining partnership." ^ Com-
panies formed to operate mines appear in English cases
in the esirly part of the last century - before the discov-
ery of the mineral wealth in our West. These companies,
like most joint stock companies of the day, had trans-
ferable shares, though they were not always represented
in formal organizations with certificates of stock.
From the fact that these shares were full}" transferable,
that is, that the rule of ordinary partnerships known
as delectus personae did not apply, certain other excep-
tions to the usual rules of partnership were also estab-
lished at an early date.^ It would seem more likely that
these doctrines were applicable to all associations than
that they were peculiar to the law of mines. They
were taken up, however, in our western States when
their courts began to decide mining litigation and
rapidly developed into an arbitrary exception to the
law of ordinary partnership and not limited to true
associations. The doctrine has been applied to oil
drilling proprietors ^ and to some extent to proprietors
of irrigation ditches.^ This mining partnership law
soon became crystallized in the codes. Attention will
be called hereafter to the relation this law bears to. that
of other associations for profit.

1 See § 17, note 5.
« See § 26, note 4.

* See § 22, notes 2 and 6, and § 26, note 6.

* See § 17, note 5.
» See § 17, note 7.

10

Chap. II] SYNDICATES [§ 8

§ 8. Syndicates

Syndicates and ''pools," formed sometimes under
elaborate agreements, sometimes in the most infor-
mal way, usually for the purpose of speculation in
securities or commodities, are more modern organ-
izations that have sometimes been deemed partner-
ships^ and sometimes merely joint contractors or un-

^ On a bill to cancel a conveyance for fraud. Held: "The Hogg-
Swayne Syndicate was a private association whose members had nego-
tiable shares and interests varying as sales and purchases of respec-
tive interests took place; but as a partnership it bought and sold the
Snow title and all the members thereof, defendants herein, are Uable
as partners for the proceeds of the Snow interest coming into the hands
of the Syndicate." One of the defendants bought in after the contract
of purchase now rescinded. Snow v. Hazelwood, 179 Fed. 182, 185
(C. C. A. — Tex.).

Held on the evidence that a note signed by syndicate managers
was the note of the syndicate and not their personal note and that it
had been paid by plaintiff becoming a subscriber to the syndicate to
that extent. This was a syndicate to buy securities of two railroads
and combine them and issue new securities to members of the syndicate.
Continental Nat. Bank v. Heilman, 81 Fed. 36, 41.

"Now a syndicate, according to the undisputed evidence, is an
association of individuals formed for the pin-pose of conducting and
carrying out some particular business transaction, ordinarily of a
financial character, in which the members are mutually interested. It
is as respects the persons composing it a partnership and in so far as
these same persons are concerned the legal obhgations assumed by
them are as between themselves substantially the same as those which
the law imposes on the members of an ordinary co-partnership."
Hambleton v. Rhind, 84 Md. 456, 487.

A syndicate agi-eement for the piu"chase, sale and ultimate division
of certain stock was settled by a distribution of the stock. One of the
signers now seeks to reopen the settlement on the ground that the
managers violated their duty in operating on their own account.
Held: Cannot reopen the account with the other partners for fault of
the managers. His right is against the managers. Boody v. Drew, 46
How. Pr. 459.

The famous partnership case of Pooley v. Driver, 5 Ch. D. 458,
really involved an unincorporated association. A statute had been
passed called Lord Bovill's Act, providing that one who loaned money
to a firm in consideration of a share in the profits should not be deemed
a partner. The owners of a business made agreements with a group of
investors purporting to provide for a series of separate loans to the
firm to take advantage of this statute. The agreements provided that
the firm should use the money loaned in the business and not draw it

11

§ 9] ASSOCIATIONS FOR PROFIT [Chap. II

associated groups.^ In their most artistic form they
are probably really trusts. No general rule can be laid
down, for the forms taken by syndicates are varied and
the legal relation of the members depends on the facts
of the particular case. Similar to these syndicates are
the organizations of individual insurance underwriters
usually called ''Lloyd's." When skilfully organized
these are not partnerships and are therefore discussed
more fully hereafter.^ In some instances, however,
they are formed under articles of association giving the
associates considerable powers of control over the man-
agement of the business by the attorney and in actions
other than those upon their policies of insurance they
have therefore been properly held partnerships.'*

§ 9. Statutory Joint &tock Associations

In some States elaborate forms of associations for
profit are organized under statutes which make them
almost, if not quite, corporations. In New York,
Pennsylvania and Michigan such statutory organiza-
tions have been largely employed in business enterprises.
In New York in particular, this form of organization,
there called a joint stock association,^ proved so satis-

out. The court held that it was really a device to avoid liability and
not a real loan and that the contributors were partners.

A combination of more than twenty persons formed on the prin-
ciple of investing the subscriptions of the members and dividing the
capital fund and profits among themselves by means of certificates
convert il)l(! by annual drawings by lot into preference dividend bonds
bearing interest with a bonus was held an association for the acquisi-
tion of gain and so illegal because not registered. Sykes v. Beedon, L.
R. 11 Ch. D. 170, 189.

» See § m. 3 See § 49. * See § 49.

' Thi.s term is one of the earliest applied to business associations
with transferable! shares and for a time continued to be used after
these ,'i.s80ciations began to be incorj)orated. "Joint stock company"
in early Massachusetts statutes was equivalent to corjjoration or-

12

Chap. II] STATUTORY JOINT STOCK ASSOCIATIONS [§ 9

factory that all the great express companies were or-
ganized under it in preference to the general law author-
izing incorporation.

The New York judges themselves have been uncer-
tain as to the proper classification of these associations,
but the later decisions seem to hold that they are not
corporations and are therefore partnerships.^ When

ganized under general laws. Attorney General v. Mercantile Co., 121
Mass. 524.

2 Issue whether a New York statute taxing corporations applied to
joint stock companies organized under statute. Held: Original statute
allowing suit against and by president or the association expressly
declared they were not corporations and though recent statutes have
given them nearly all the attributes of corporations they have not
obliterated that distinction. The distinction is that the creation of a
corporation merges in it the individual rights and habihties of the
members, but the organization of a joint stock company leaves
those in full force (p. 284). "We can say as we did say in Van
Aernam v. Bleistein, 102 N. Y. 360, 7 N. E. 537, that a joint stock
company is a partnership with some of the powers of a corporation"
(p. 287). People ex rel. Winchester v. Coleman, 133 N. Y. 279, 31
N. E. 96.

Shares in a joint stock association owned by a deceased resident of
New York are personal property and taxed at full value, though part
of the assets of the association were real estate which if it had de-
scended to the heu's of the deceased would have been exempt. Re
Jones, 172 N. Y. 575, 65 N. E. 570.

But see opinion of O'Brien, J., in Hibbs v. Brown, 190 N. Y. 167,
82 N. E. 1108.

Statute authorizing action against president of unincorporated
associations. President was defendant and jurisdiction determined
by his residence. Adams Express Company is a partnership (citing
cases). Brooks v. Dinsmore, 15 Daly (N. Y.) 428, 8 N. Y. S. 103, 28
N. Y. St. 421, 18 N. Y. Civ. Proc. 98. Ace. Bacon v. Dinsmore, 42
How. Pr. (N. Y.) 368.

A voluntary association under New York statutes is a quasi cor-
poration. Members are not partners. It may be sued by a member
and it mav sue a member. Hence president may sue treasurer for its
funds. Strebe v. Albert, 1 N. Y. City Ct. 376.

The decedent, a resident of New Jersey, owned shares in a New
York joint stock association. Held: They are liable for a transfer tax
on the proportion of their value which the property within the State
bore to the entire property of the association. "The distinction be-
tween a coi*poration and a joint stock association, as concerns the
point for decision, is that a corporation is an artificial entity existing
in contemplation of law in the State of its creation. It can have no
existence elsewhere and is recognized in other jurisdictions only by

13

§ 9] ASSOCIATIONS FOR PROFIT [Chap. II

these associations have come before the courts in other
jurisdictions divergence of opinion has resulted as to

comity. It is a citizen within the meaning of certain provisions of the
Federal Constitution. Whereas a joint stock association, though it
have some of the rights of a corporation and may sue and be sued in
the name of its president, stiU does not exist as an entity distinct from
its members. . . . Even if, unhke a partnership, which it really is, it
can be said to exist as an artificial being, it owes its existence not to
the State but to the contract of its members and may therefore be said
to exist wherever it does business or owns property. In that sense its
analogy to a corporation is to one organized under the laws of two or
more States." Re Wilkner's Estate, 138 N. Y. S. 649, 153 App. Div.
804.

Shareholders in a joint stock association whose articles give the
directors power to dissolve it cannot object to such dissolution and sale
of its assets on the theory that it is a corporation because People v.
Coleman decided it was not. Francis v. Taylor, 65 N. Y. S. 28, 52 App.
Div. 631.

An officer of a joint stock company cannot refuse to produce docu-
ments in his custody when subpoenaed. It is not a corporation. Woods
V. De Figaniere, 24 N. Y. Super. Ct. 659.

Many of the earlier cases, however, treated them Like corporations.
Sandford v. Supervisors, 15 How. Pr. 172.

In a controversy between a shareholder and the company it is not
to be considered a partner, but the controversy must be decided on
the analogy of corporations. Waterbury v. Merchants Co., 50 Barb.
157.

An action on a liabihtj^ of the company may be maintained by a
shareholder. For pvuposes of action the officer sued is a corporation
Bole. Westcott v. Fargo, 61 N. Y. 542.

They are taxable under the act taxing corporations. They must be
deemed to be incorporated. People v. Wemple, 117 N. Y. 136, 22 N. E.
1046.

It is, like a corporation, a citizen of New York for purposes of re-
moval to United States courts. Fargo v. McVicar, 55 Barb. 437; INIaltz
V. American Express Co., 1 Flip. 611 (C. C. — Mich.); Fargo n.
L. N. A., etc. Co., 6 Fed. 787 (C. C. — Ind.).

Whether or not a corporation, the right to sue the shareholders aa
individuals is preserved. Mooro v. Brink, 4 Hun 402, 404.

Under a statute authorizing an executor to deliver property in
specie instead of selling it, shares in a joint stock company may be de-
livered. The interest of the testator was like that of a shareholder in
a corporation. He could di.spose of the shares by will in spite of a pro-
vision in the articles requiring offer to the company before sale. Lane
V. Alhcrtson, 79 N. Y. S. 947, 953, 7S App. Div. 607.

Shareholders in a joint stock association have the same rights as
stockholders in a cor])oration to examine the books, l)ut a prerequisite
to granting nianchinuis for that purpose is that the officers after a rca-
Honabie time refu.se. Re Hatt, lOS N. Y. S. 468. See U. S. v. Adams
Exprc8.s Co., 229 U. S. 381, 390, 57 L. cd. 1237; 33 S. Ct. 878.

14

Chap. II] STATUTORY JOINT STOCK ASSOCIATIONS [§ 9

their status.^ The United States Supreme Court has
held that they are not corporations within the rules

3 A bill to enjoin violation of a patent by a New York joint stock
association may be brought against shareholders individually as part-
ners. Tyler v. Galloway, 13 Fed. 477 (C. C. — N. Y.). But see
Raymond v. Colton, 104 Fed. 219, 224 (C. C. A. — N. Y.).

The following cases appHed the analogy of corporations. Shares in
the Adams Express Company are to be treated as shares in a corpora-
tion for the purpose of apportioning dividends between life tenant and
remainderman. A distribution of bonds was held not in substance a
cash dividend. Bishop v. Bishop, 81 Conn. 509, 529, 71 Atl. 583.
Ace. D'Ooge V. Leeds, 176 Mass. 558, 563, 57 N. E. 1025.

The common law rule as to service of process on a corporation ap-
plied to service on a New York joint stock company and service of a
mandamus by order of court on the local express agent was held vahd.
State V. Adams Express Co., 66 Minn. 271, 68 N. W. 1085. Ace.
Adams Express Co. v. Schofield, 111 Ky. 833, 64 S. W. 903.

In an action of tort against a New York joint stock association sued
in the name of its treasurer under the New York statute for negligence
by an express driver, held that the organization is a corporation under
the law of New York suable this way and so the New Jersey statute
providing for suit against associations in their association name did
not apply. Edgeworth v. Wood, 58 N. J. L. 463, 33 Atl. 940. See
Tide Water Co. v. State Board of Assessors, 57 N. J. L. 516, 31 Atl. 220.

On the issue whether a certain association was a joint stock com-
pany or a corporation, its classification by the statutes of New York
where it was created, as a joint stock company, is not conclusive.
State V. U. S. Express Co., 1 Ohio N. P. 259.

President of a New York joint stock association may sue on behalf
of the association for money stolen because the partners are too numer-
ous to join. Under code which merges equity and law this method
can be used even in actions not of an equitable nature. Piatt v. Col-
vin, 50 Ohio St. 703, 36 N. E. 735.

A New York joint stock association may be served with process in
Ohio Hke a corporation. People v. Wemple cited as authority for its
being substantially a corporation. Piatt v. Colvin distinguished on the
ground that the issue was not directly presented. Express Co. w. State,
55 Ohio St. 69, 44 N. E. 506.

In other States they have been held not corporations. A New York
joint stock association cannot be indicted for doing business in the
State without fihng the papers required by statute of foreign corpora-
tions. Comm. V. Adams Ex-press Co., 123 Ky. 720, 97 S. W. 386. But
see Adams Express Co. v. Schofield, 111 Ky. 833, 64 S. W. 903.

In Massachusetts they have been held partnerships. Taft v. Ward,
106 Mass. 518; Bodwell v. Eastman, 106 Mass. 525; Gott v. Dinsmore,
111 Mass. 45.

It has been held in Massachusetts, however, that certain "joint
stock associations," so-called, organized under the laws of other States
as something distinct from corporations may have so many of the ele-
ments of corporations that they will be deemed to be such in apply-

15

§ 9] ASSOCIATIONS FOR PROFIT [Chap. II

relating to jurisdiction by reason of diverse citizenship
of the parties.^ Under another New York statute,
which apphes also to non-profit associations,^ associa-
tions of seven or more members sue and are sued in the
name of its president or treasurer.® In an action against

ing ^Massachusetts statutes regulating transaction of business by foreign
corporations. "When by legislative authority or sanction an associa-
tion is formed capable of acting independently of the rules and princi-
ples that govern a simple partnership, it is so far clothed with corporate
powers that it may be treated for the purposes of taxation as an arti-
ficial body, and become subject as such to the jurisdiction of the govern-
ment under which it undertakes to act in its associated capacity."
OHver v. Liverpool & London Co., 100 Mass. 531, 540. As to the real
effect of this case, see Liverpool Ins. Co. v. Mass., 10 Wall. 566; Ed-
wards V. Warren, etc., Works, 168 Mass. 564, 567, 47 N. E. 502.

Adams Express Company not being a corporation cannot sue for
damages to its property in the name of the association or in the name
of its officers as trustees. Weir v. Met. St. Ry., 126 Mo. App. 471, 103
S. W. 583.

An action against the Adams Express Company describing it not as
a legal entitj^ but as a joint stock association organized and existing
under the laws of New York must be dismissed, for it names no party
defendant. Met. St. Ry. v. Adams Express Co., 130 S. W. 101.

* In an action by the president of the United States Express Company
in the Illinois L'nited States Court. Held : "On looking into the record
we find no satisfactory showing as to the citizenship of the plaintiff. The
allegation of the amended petition is that the United States Express
Company is a joint stock company organized under a law of the State
of New York and is a citizen of that State. But the express company
cannot be a citizen of New York within the meaning of the statutes
regulating jurisdiction unless it is a corporation. In fact the allega-
tion is that it is not a corporation, but a joint stock company — that
is a mere partnership. And although it may be authorized by the laws
of the State of New York to bring suit in the name of its president,
that fact cannot give the company power by that name to sue in a
federal court." The record does not show that the members of the
company are citizens of .some State other than Illinois. Chapman i;.
Barney, 129 U. S. 677, 082, 32 L. ed. 800, 9 S. Ct. 426.

» See § 70, note 21.

» Robl)ins v. Wells, 26 How. Pr. 15.

Failure to name as defendants the officers or members of a joint
stock a.s.sociation is waived by a general appearance of the association.
BrookH V. Farmers' As.s'n, 21 Weekly Dig. 58.

It may be sued for libel. Van Aernam v. Bleistein, 102 N. Y. 355,
7 X. K. 537.

It i.s a Huffiriont an.swer to an action against an officer of a joint stock
a.s.sociiiti<)n und(!r the statute to aver lliat it has gone out of existence.
Pcckner v. Webb, 71 N. Y. S. 708, 35 Mi.sc. 291.

16

Chap. II] STATUTORY JOINT STOCK ASSOCIATIONS [§ 9

a joint stock association the funds of the association
must be exhausted before suing the individual members.^
After the creditor has obtained judgment against the
corporation and it is unsatisfied he may sue the indi-
vidual members as partners. He sues them not on the
judgment but on the original cause of action.^ Under
this statute the association through its officer may sue
and be sued by another member in an action at law.^
A shareholder may bring suit for a dissolution of the
association/" and is entitled to a sale of the assets as
is a member of an ordinary partnership.^^ Other de-

^ Robbins v. Wells, 26 How. Pr. 15.

8 Witherhead v. Allen, 4 Abb. Dec. 628, 632 (N. Y.).

Though a creditor must get judgment against the association before
suing individual members (under New York statute) yet the judgment
is not conclusive as against the individual members. Allen v. Clark,
65 Barb. 563.

^ A president of an unincorporated joint stock company suing for
it under the statute can sue at law a shareholder to recover an assess-
ment where the articles of association provide for it. Bray v. Farwell,
3 Lans. 495, 508.

A member of a joint stock association may sue it in the names of its
officers under the statute. Sanders v. Edling, 13 Daly (N. Y.) 238;
Fritz V. Muck, 62 How. Pr. 69; Westcott v. Fargo, 61 N. Y. 542, 550.

A member of a stock exchange cannot sue the president under the
statute for an injunction to prevent his suspension. The statute was
intended to apply to suits having in view a remedy against the prop-
erty of the association. As this was a voluntary association and there
was nothing to show that the proceedings were fraudulent or corrupt
or the result of a conspiracy, there is no case for equity jurisdiction.
Rorke v. Russell, 2 Lans. 244, 247.

A joint stock company may be sued by a member for nuisance.
Saltsman v. Shultz, 14 Hun 256.

1" A shareholder in a joint stock association, being personally liable
for its debts Hke a partner, is entitled to "institute an action for its
dissolution whenever a suitable occasion arises rendering it legiti-
mately desu-able to wind up its affaii's." Snyder v. Lindsey, 36 N. Y.
S. 1037.

'1 On a consolidation of joint stock companies a dissentient share-
holder is not bound to accept valuation of his shares fixed by the ma-
jority but hke any partner is entitled to a sale. McVicker v. Ross, 55
Barb. 247.

A consoUdation of joint stock companies in which stock in a cor-
poration was given for assets of the associations. On a shareholder's
bill against the trustees. Held: Duty of trustees after dissolution is to

17

§ 9] ASSOCIATIONS FOR PROFIT [Chap. II

cisions relating to these associations apply the analogies
of the law of corporations. ^-

seU the assets and divide the proceeds among the shareholders. Minor-
ity cannot be forced to take stock in the corporation. If the trustees
fail to convert into cash, the shareholders may sue them and recover
either the proceeds or the value of their shares. Receiver of remaining
assets appointed. Frothingham v. Barnej', 6 Hun 366, 372.

'- Plaintiff and defendant held all but five shares in a joint stock
company. The other shares were held by directors. Defendant agreed
to buy plaintiff's stock in consideration of his resignation and that of
his relatives from office and dehvery of one-quarter of the goods on
hand. Resignations dehvered later. Action for goods. Held: Con-
tract void under statute of frauds (p. 225, one judge dissenting). Con-
tract not void as against public policj^ because practically entire stock
ownership participated so not an illegal contract to resign as director
or misappropriate goods of the association (p. 226, one judge dissent-
ing). " In fact and in law there was no partnership between the parties
and there were no firm assets, and the view which they took of their re-
lations could not change their legal aspect. AU that the plaintiff had
to sell and all that the defendant could buy were the plaintiff's shares
in the association" (p. 224). Rajonond v. Colton, 104 Fed. 219 (C. C.
A. — N. Y.).

A shareholder's petition to dissolve a joint stock association on the
ground of fraud was held on the evidence not sustained. The associa-
tion was not bound to declare dividends of profits (p. 217). Though
persistent undervaluation in annual inventories might tend to depre-
ciate plaintiff's stock and might be sufficient, the evidence did not
establish it (p. 214). Colton v. Raymond, 85 N. Y. S. 210, aff'd 100
N. Y. S. nil, 114 App. Div. 911.

Action to restrain officers of joint stock association from consoUdat-
ing with another express company. They had had the by-laws amended
so as to allow it to be done without consent of majority of shares.
Held: The power to amend the by-laws did not authorize such an
act which was beyond the scope of the enterprise. All must consent.
All shareholders need not be joined. Blatchford v. Ross, 54 Barb. 42.

Bill by shareholders in the United States Exjjress Company alleg-
ing fraud and praying that directors be obliged to call meeting of stock-
holders to cdect directors. Articles named the original dircictors and
provided that they might fill vacancies and that on petition of two-
thirds of stock directors should call a meeting for removal of a director.
No provision requiring calling of otiier meetings. In fact none ever
held and present directors were all elected by the board. Held: In
fact no fraud proved. Not entitled to decree for caUingof meeting, for
the articles of agre(!nient are valid and binding at common law regard-
less of statute. "Tlie United States Kx])ress Comjiany was tliereby con-
Btitut(!d a legal entity with the right of existence to such time as it
miglit H(!(! fit to extend tii(' same." It is legal to provide for stock in
Hucli a.s.socia1ions with limited voting rigiils. Dissent l)y one judge
who held that tlu; statute regulating sucli associations and the articles
api)arcntly drawn under it really conteini)lated some election of

18

Chap. II] STATUTORY JOINT STOCK ASSOCIATIONS [§ 9

In Pennsylvania, under the statute authorizing hm-
ited partnerships, associations have been organized and
have assumed considerable commercial importance.
They are deemed to be partnerships and not corpora-
tions,^^ though the liability of members is as limited as
ordinarily in corporations and they have other attri-
butes of corporations.^^ In the Federal Courts they

directors and that the plaintiff should have his decree. Spraker v.
Piatt, 143 N. Y. S. 440, 158 App. Div. 377.

Under statute of 1849 there need be no subscription in writing by
the members. National Bank v. Van Derwerker, 74 N. Y. 234.

President of a joint stock association had power to mortgage its
property to pay its debts (where a similar mortgage had been expressly
authorized by stockholders and directors). Nelson v. Drake, 14 Hun
465, 470.

1^ "A partnership association, commonly but inaccurately called
a joint stock company, is the creation of the statutes and while it is
assimilated in some respects to a corporation it is nevertheless essen-
tially a partnership." By statute a pm-chaser of shares may demand an
election to membership and if not granted within a reasonable time
may demand an appraisement and payment for his shares. When
shares are purchased at different times the election or appraisement
must be as to all he holds at the time of demand. More than two
months not unreasonable where six hundred members scattered over
four States and no meeting for eight months. Method of appraisement
considered. Carter v. Producers Oil Co., 200 Pa. St. 579, 585, 50 Atl.
167.

Companies organized under the Pennsylvania Act of 1874 simply
limited partnerships. Githens v. Grocery Co., 2 Del. Co. Ct. 452;
Lennig v. Penn. Morocco Co., 16 Weekly N. C. 114.

Quasi-corporations de facto. Eliot v. Him-od, 108 Pa. St. 569; Briar
Hill Co. V. Atlas Works, 146 Pa. St. 290, 23 Atl. 326.

Limited partnership associations "are in effect corporations or
guasi-corporations. They are creatures of the law and by its express
provisions they may be dissolved and thus cease to exist." Dissolu-
tion five years before by decree of court is sufficient plea in abatement
to writ served on its secretary. Billington v. Gauthier Co., 9 Atl. 35
(Pa.).

'* Members of a Umited partnership association are not personally
hable for torts of its agents unless they personally authorized or rati-
fied them. Such association has some of the attributes of a corpora-
tion. "UnUke an ordinary partnership and like a corporation it is an
artificial person and survives the death of a member or a sale of his in-
terest." Whitney v. Backus, 149 Pa. St. 29, 34, 24 Atl. 51.

Shareholders in a hmited partnership association after judgment
against the association unsatisfied must be personally summoned in
the proceeding to estabhsh their individual habihty for unpaid sub-

19

§ 9] ASSOCIATIONS FOR PROFIT [Chap. II

are also held partnerships.^^ Courts have usually re-
quired strict compliance with the statutes authorizing
limited partnerships if the members are to obtain its
benefits and be relieved of the unlimited liability for
firm debts that attaches to an ordinary partner. The
Pennsylvania courts have been equally strict with
these associations.^^ One striking provision of the

scriptions and their accounts with the association settled. Lauder v.
Tillia, 117 Pa. St. 304, 11 Atl. 86.

^* A Pennsylvania limited partnership association is not a corpora-
tion and not entitled to sue as a citizen of Pennsylvania in the United
States Court. Imperial Brewing Co. v. Wyman, 38 Fed. 574, 579.

1^ False statements in certificates make shareholders Uable as gen-
eral partners. Van Horn v. Corcoran, 127 Pa. St. 255, 18 Atl. 16.

Insufficient statements, i.e., not specific enough, have the same
effect. Gearing v. Carroll, 151 Pa. St. 79, 24 Atl. 1045; Haslet v. Kent,
160 Pa. St. 85, 28 Atl. 501.

A statement in the certificate of hmited partnership filed under the
Pennsylvania Act of 1874 stated that certain shares were paid for by
a right of way. In fact the right of way had not yet been acquired.
Held : Shareholders hable as general partners. Appeal of Hite Natural
Gas Co., 118 Pa. St. 436, 12 Atl. 267.

But a statement that the capital was paid tlu-ee-fourths in cash was
comphed with though the payments were not by aU shareholders pro-
portionately. Lauder v. Logan, 123 Pa. St. 34, 16 Atl. 44.

Lumping together separate tracts of land did not invahdate cer-
tificates. Laflin Co. v. Steytler, 146 Pa. St. 434, 23 Atl. 215; Cock v.
Bailey, 146 Pa. St. 328, 23 Atl. 370.

A limited partnership association certificate stating the capital and
that it was to be paid forthwith was filed, but the capital was never
paid in. The statute fixed no time for payment but contemplated pay-
ment by instalments. Held: Statute not complied with where they
start business with none paid in and the members are hable as general
partners. Hill v. Stettler, 127 Pa. St. 145, 13 Atl. 306.

Strict compliance with the statute is necessary. Good faith of de-
fendants or actual knowledge of i)laintiffs is immaterial. A failure to
include a detailed description of the property contributed as capital
made them liable as general partners. Sheble v. Strong, 128 Pa. St.
315, 18 Atl. .397.

Cai)ital may be paid in patent rights. In the absence of fraud, an
cxccH.sivf! valuation docs not invalidate (he organization. Rehfuss v.
Moor(!, 134 Pa. St. 4()2, 19 Atl. 756.

Witliclrawal of caf)ital from tin; bank whore deposited before the
organization is coniplctcul, but not from tlie funds of the association,
does not iiiakc^ tlit; organization invalid. Masters v. Lander, 131 Pa.
St. 195, IS Atl. 872.

Failure to pay off tlu; mortgage as his contribution to the capital

20

Chap. II] STATUTORY JOINT STOCK ASSOCIATIONS [§ 9

Pennsylvania statute is that which exempts the
association from liability on any contract involving
over five hundred dollars unless it is signed by two
of the managers. ^^ The association is named as

made the subscriber liable to creditors for the balance of his subscrip-
tion. Cox V. Watts Co., 157 Pa. St. 93, 27 Atl. 687.

If the plaintiff advised and assisted in the organization of a limited
partnership association and took its bonds for indebtedness to him,
he cannot later contend that the organization was defective and that
the members are liable as general partners. Alleghany Banks v. Bailey,
147 Pa. St. Ill, 116, 23 Atl. 439.

One of the thi-ee shareholders of a hmited partnership association
may transfer all his shares immediately after organization without
impairing its validity. Re Globe Refining Co., 151 Pa. St. 558, 25
Atl. 128.

The method of dissolution provided by statute must be followed if
the partners are to escape unlimited habihty. Hence while equity will
wind it up as to six months' business continued after the termination
of the original five-year hmit just as it would on petition of a minority
proving fraud or waste or insolvency, as to the busmess conducted
under the old partnership during the five-year term a separate hquida-
tion by the trustee must be had. Tindel v. Park, 154 Pa. St. 36, 42,
26 Atl. 300.

Members of a Hmited stock company are not hable as general part-
ners for goods ordered on approval in the name of the company before
the recording of the articles of association where recorded before the
approval. Hinds v. Battin, 163 Pa. St. 487, 30 Atl. 164.

The schedule of personal property subscribed in Ueu of cash by mem-
bers of a partnership association is sufficient if it is elaborate and truth-
ful and the result of an honest effort to comply with the statute and is
such as to enable parties dealing with the association to readily ascer-
tain the kind, amount and value of property contributed. Robbins Co.
V. Weber, 172 Pa. St. 635, 34 Atl. 116.

Members of one hmited partnership association formed another
and certified as its assets property which was the property of the old
association. Held: Title to the property not absolute unless it was a
surplus after payment of debts or creditors consented. Hence cer-
tificate not correct and members hable as general partners. Lee v.
Burnley, 195 Pa. St. 58, 45 Atl. 668.

Members of a Limited partnership association are hable as general
partners when the statement filed is materially false and no subscrip-
tion book has been kept. In such a case, the funds assigned for
creditors are not hable for judgments in favor of the partners. Appeal
of Gebhart, 4 Pa. Super. Ct. 106.

The use of the abbreviation "Ltd." instead of "Limited" in the
name as required by statute is not _ such a violation of the statute as
to impose the penalty. Abington Co. v. Reynolds, 24 Pa. Super. Ct.
632.

" Under Pennsylvania statute of limited partnership associations

21

§ 9] ASSOCIATIONS FOR PROFIT [Chap. II

the party to an action. ^^ The provisions relating
to shares resemble the law of corporations.^^ The

an obligation over S500 not signed by two managers is enforceable only
against the person incurring the debt. Held : A draft on such an asso-
ciation accepted by only one manager and discounted by plaintiff
bank was not enforceable against him. Bank bound to know it required
two. If defendant signed expecting another to sign he is not bound.
Mercantile Bank v. Lauth, 143 Pa. St. 53, 21 Atl. 1017.

A hmited partnership association is not liable on a contract for
more than $500 unless signed by at least two managers. Creditor who
has one signed by one only cannot on gi'ound of mistake bring a bill to
reform and compel execution by two. Andrews Bros. Co. v. Youngs-
town Coke Co., 39 Fed. 353 (C. C. — Pa.).

A member of a hmited partnership association has not the power
of an ordinary partner to bind the association by a contract to sell and
third parties are bound to know that such authority is vested in the
managers. ALso of the $500 hmit. Pittsburg Co. v. Reese, 118 Pa. St.
355, 12 Atl. 362. Ace. on latter point, Walker v. Keystone Co., 131
Pa. St. 546, 20 Atl. 309.

A hmited partnership association may adopt and sue on a contract
not executed according to the statutory formulation when it has made
or tendered full performance. Park Co. v. Kelly Co., 49 Fed. 618
(C. C. A. — Pa.).

Where a hmited partnership association has received the considera-
tion it is estopped to set up the defense to an action for the price that
the contract was not signed by two managers. Here the company
used the machine and claims title to it. Yaryan Co. v. Perm. Glue Co.,
180 Pa. St. 480, 36 Atl. 1080.

Wives of other shareholders as shareholders may make the requisite
seven to organize. "Ltd." is sufficient for "Limited." The $500 hmit
if violated does not make therh liable as general partners. Bernard Co.
V. Packard, 04 Fed. 309 (C. C. A. — Pa.).

An association was liable for ore purchased by authorized officer
but without a contract executed as required by statute for liabilities
over -SoOO. The deliveries were each less than that and the company
had the use of it. Held: The company is liable. McLaughlin v. Cen-
ter Co., 10 Pa. Co. Ct. 533.

So of assessments on a mutual fire insurance pohcy which it had
h((ld and enjoyed twenty months. Interstate Co. v. Brownback, 1 Pa.
Super. Ct. 183.

'" An action against a limited partnership association under Act of
1874 should bt; brought in tlie firm name instead of that of the partners.
Ladner v. aibl)on, 6 We(ikly N. C. 127.

Tort for negligence of sto(;kholders of a limited joint stock company,
but tlie company was served, appeared and defended. A verdict
again.st the; comj)any was sustained. Wilkinson v. Evans, 34 Pa. Super.
Ct. 472.

'" An attaching creditor gets the same riglits in stock of a limited
partrirTship as.sociation that his debtor had and though the assignee
of the flebtor did not till afterwards comply with all the requirements

22

Chap. II] STATUTORY JOINT STOCK ASSOCIATIONS [§ 9

remaining decisions might be accounted for on either
theory.^"

In Michigan the '^partnership association hmited"
closely resembles the Pennsylvania "limited partner-
ship association." There seems to be a tendency to
treat them as corporations,^^ though it is admitted that

for a formal transfer, the assignment from the debtor was complete
before that and just as in the case of a corporation, the association
could not refuse to record the transfer on comphance with the formali-
ties. Tide Water Pipe Co. v. Kitchenman, 108 Pa. St. 630, 636.

A member of a hmited partnership association may sue it for a debt
due him. MacGeorge v. Chemical Mfg. Co., 141 Pa. St. 575, 21 Atl.
671.

A declaration of forfeiture by trustees which does not foUow notifi-
cation of default exactly as required in the by-laws is void and title to
the shares remains in the shareholders. Morris v. Mettaline Co., 164
Pa. St. 326, 30 Atl. 240; 166 Pa. St. 351, 31 Atl. 114.

On death of member of a limited partnership association a petition
for appraisal of assets was filed by his executor to fix the price to be
paid by the company for the shares. Held entitled to pro rata share of
profits made after death of member. Re Henry Disston, etc. Co.,
8 Weekly N. C. 58.

-" The surplus of a hmited partnership association making steel
springs may be invested in stock of a steel company to insure a supply
of steel. Not ultra vires. Layng v. A. French Co., 149 Pa. St. 308, 316,
24 Atl. 215.

A hmited partnership to refine oil may purchase stock in an oil re-
fining company. Where members have allowed managers to pursue a
pohcy for two years, they are barred by laches from objecting. Patter-
son V. Tidewater Co., 12 Weekly N. C. 452.

A partnership association limited is not liable on checks issued by
its treasurer without authority modifying a contract. Straw v. Murray,
192 Pa. St. 642, 38 Atl. 576.

Chairman of a hmited partnership association who was entrusted
with the management of its affairs had power to mortgage its property
to secm'e a creditor of the company. Appeal of Fisher, 14 Atl. 225 (Pa.).

Managers of hmited partnership association have no power to sell
its entu'e property without the consent of all the shareholders. Carter
V. Producers Co., 164 Pa. St. 463, 30 Atl. 391.

An assignment for the benefit of creditors made by the chairman and
secretary of a hmited partnership association pursuant to authority
of stockholders is vahd without formal vote of managers though the
by-laws provide that the managers shall have entire control of the
business of the company. Rodgers Printing Co. v. Santa Claus Co.,
11 Pa. Co. Ct. R. 529.

21 Limited partnership associations are governed by the law of cor-
porations rather than by the law of limited partnerships. This was a
proceeding to collect subscription to shares. Defense that paid by

23

§ 9] ASSOCIATIONS FOR PROFIT [Chap. II

not all legislation affecting corporations is applicable
to these associations.^^ There is a provision similar to
that in Pennsylvania making the association liable on
contracts involving over five hundred dollars only if
signed by two managers. ^^ The members are liable as

notes. Winding up. Rouse v. Detroit C3^cle Co., Ill Mich. 251, 257,
69 N. W. 511.

Those who deal with a partnership association Hmited are estopped
to deny its existence just as they would be in dealing with a corporation.
"Each is a legal entity whose sole warrant for existence is found in and
whose powers and liabilities are fixed by statute." Hence he cannot
for slight irregularities in organization hold as general partners share-
holders not responsible for and ignorant of them. Refuses to follow Penn-
sylvania cases. Staver Co. v. Blake, 111 Mich. 282, 288, 69 N. W. 508.

Oral evidence of what was said at meeting of shareholders of a part-
nership association Umited is not admissible when the record is not
ambiguous. Lipsett v. Hassard, 158 Mich. 509, 511, 127 N. W. 1091.

Evidence showed no contract for salary between a partnership
association limited and its president. Berry Bros. v. Hooper's Est.,
179 Mich. 67, 146 N. W. 275. But in a more recent case it was said
that a member of such an association is not in a worse position as to
interest on advances to the firm than a member of an ordinary part-
nership. Mack V. Engel, 165 Mich. 540, 550, 131 N. W. 92.

^ Certain provisions of the constitution are made applicable to aU
associations and joint stock companies having any of the powers or
privileges of corporations. But it does not follow that all provisions
in later legislation as to corporations apply to partnership associations.
The provision for minority representation is one that does not apply.
Attorney General v. McVickie, 138 Mich. 387, 389, 101 N. W. 552.

^ Geel V. Goulden, 168 Mich. 413, 421, 134 N. W. 484; McCain v.
Smith, 172 Mich. 1, 137 N. W. 616, 619.

PlaLntifT had a claim for a commission on G. who had sold certain
patents to defendant, a Michigan limited partnership association.
Plaintiff claimed defendant promised to paj^ it. Held: Under Michigan
statute not lial)le l)ecause $500 involved and not formally executed.
No estoppel because plaintiff had no share in the title to the property
that was being transferred. Dickinson v. Matheson Co., 161 Fed. 874
(C. C. — Pa.).

Endorsement of a note for over $500 by only one manager does not
imposf! liability on a partnership association limited for any amount.
Citizen's Bank v. Vaugiian, 115 Mich. 1.56, 73 N. W. 143.

Tran.sf(!r by endorsenusnt of notes of a shareholder in payment of a
claim against it was not an incurring of a liability within the above
cluuHC. Shaw, Kendall Ac Co. v. Brown, 12S Mich. 573, 87 N. W. 757.

A contract crcat ing a habiiity of ov(t $500 made by a single manager
of a j)art nersliij) associat ion limited is a nullity and binds neither i)arty.
Iloyt, V. Paw I'aw GrajH- .Juice Co., 158 Mich. 619, 123 N. W. .529.

Spirit- of statute complied with wiiere there was a record of a meet-

24

Chap. II] STATUTORY JOINT STOCK ASSOCIATIONS [§ 9

general partners if the organization is not strictly ac-
cording to statute.-^ In a few other States the statutes
authorizing limited partnerships seem to have been
found adaptable to the needs of unincorporated asso-
ciations,-'' but in most States they are not fit for that
purpose.-*^

ing of all the managers who voted to approve the contract which was
then closed, though it was signed only by the president. Howard v.
Factory Land Co., 167 Mich. 251, 131 N. W. 113.

'^^ A partnership association Umited failed to record its articles and
stock was sold plaintiff by one member on false representations. Plain-
tiff sues aU as general partners for cancellation of certificate and repay-
ment of purchase price. Held for plaintiff. Nichols v. Buell, 157 Mich.
609, 122 N. W. 217.

A partnership association limited filed a schedule purporting to
show the property for which the stock was issued and the subscribers.
A block of stock was issued to one promoter in consideration of prop-
erty and turned back by him into the treasury. The property was de-
scribed only generally as the property of a former corporation, not
specifically. On a shareholder's action to cancel and recover her sub-
scription to treasury stock, Held : Statement not in compliance with
the statute and the contributions of property cannot be treated as
payments of capital stock. But one who did not become a shareholder
till after this schedule was filed and then bought treasury stock is not
liable to pay up the balance of his shares which he bought at a dis-
count. Macomber v. Endion Co., 160 Mich. 54, 59, 125 N. W. 26.

A shareholder cannot rescind contract of purchase of his shares on
ground that the partnership association limited was not legally or-
ganized when the only objection was that it did not acquire valid title
to all the property scheduled in its articles and possibly the amount of
cash capital was overstated. Andrews v. Brace, 154 Mich. 126, 117
N. W. 586.

2^ Under statute of limited partnership associations a shareholder
is hable to extent of unpaid subscriptions after judgment against the
association is returned unsatisfied. But the estate of a deceased
shareholder is not Uable on a debt incurred after his death. Bodey v.
Cooper, 82 Md. 625, 628, 34 Atl. 362.

LiabiUty of members of Hmited partnerships in Virginia by statute
is limited to unpaid subscriptions. The legislature indicated certain
contingencies where the members should be liable as general partners.
If it had intended to impose this for failure to comply exactly with the
statute, the legislature would have said so. Deckert v. Chesapeake,
etc. Co., 101 Va. 804, 810, 45 S. E. 799.

A deed of land of a partnership association formed under the laws
of Virginia executed by the association and also by all the members and
stockholders of it is sufficient to pass its title. Richmond v. Pinnix,
208 Fed. 785, 791 (D. C. — N. C).

^ In Massachusetts, for example, where unincorporated associa-

25

§ 10] ASSOCIATIONS FOR PROFIT [Chap. II

§ 10. Defective Incorporations

When a group of individuals attempt to form a cor-
poration and so far fail that they do not become a
corporation de facto j^ their legal relation creates a
problem upon which courts have differed. Most juris-
dictions have argued that there is no intermediate or-
ganization between partnership and corporation and
that as they are not a corporation they must be a
partnership.- Others have held that because the intent
was to form a corporation with limited liability of
members, they cannot be held to the full liability of
partners.^ Since it is well settled in the law of partner-

tions have been elaborately developed, the statute, Rev. Laws Ch. 71,
requires filing a certificate with the names of the partners which would
make impracticable any attempt at transferable shares.

1 For an analysis of the decisions on de facto corporations, see an
article by Prof. Edward H. Warren, 20 Harv. L. Rev. 456.

2 Re Mendenhall, Fed. Cas. No. 9425 (savings association); Cole-
man V. Coleman, 78 Ind. 344, 346 (manufacturing company); Kaiser
V. Lawrence Savings Bank, 56 la. 104, 116, 8 N. W. 772 (manufacturing
company); Central Bank v. Sheldon, 86 Kan. 460, 121 Pac. 340 (no
organization in good faith under an Arizona incorporation) ; Kierstead
V. Bennett, 93 Mc. 328, 332, 45 Atl. 42 (note of treasurer of a Trotting
Park Association); Whipple v. Parker, 29 Mich. 369, 380 (manufactur-
ing company); Fuller v. Rowe, 57 N. Y. 23, 26 (manufacturing com-
panv). But see apparentlv contra, Hudson v. Spalding, 6 N. Y. S.
877'(baseball club); Farmer's' Co. v. Jones, 147 S. W. 668 (Tex. Civ.
App.) (stockholders running a business pending reorganization). In
one case they were described as an "unincorporated association."
Ben Co. v. Zimmerman, 110 Md. 313, 321, 73 Atl. 19.

' Agreement to act as member of provisional committee of pro-
jected railroad did not make defendant liable as partner. Rcynell v.
Lewis, 15 M. & W. 517, .529; Wilson v. Curzon, 16 L. J. Ex. 122.

But dirc^ctors of watcu- supply company whi(!h faik^d to get charter
w(!re held on contract to buiUl works. Doubleday v. Muskott, 7 Bing.
110, 116.

Subscribers to and stockholders in defectively organized corporation
are not i)artiiers a.s to the business carried on. Fay v. Noble, 7 Cush.
IHH; Trowbridge?;. S(;udder, 11 Cush. 83; Ward?'. Brigham, 127 Mass. 24.

When; tin; Hubsciribcr is induc(!d to go in by fraud of a promoter,
whr'llicr j)artner.s or not, was not decided. Perry v. Hale, 143 Mass.
540, 10 N. ]':. 174.

Transacting business before certificate issued, tliougii contrary to

26

Chap. II] DEFECTIVE INCORPORATIONS [§10

ship that intent to escape personal liability does not
protect those who do acts which otherwise would con-
stitute them partners/ it would seem that an associa-
tion for profit which fails to carry out its intention to
become incorporated should be held to be a partner-
ship unless that jurisdiction is prepared to recognize
the legal existence of associations as intermediate be-
tween partnership and corporation.

Promoters of corporations may or may not be part-
ners as to the business of organizing the corporation,
but they are not partners merely because they con-
template doing business in the future through a cor-
poration nor because they are numerous.^

A slightly different situation arises when an un-
doubted association decides to incorporate. Here there
is a partnership to start with and all hold that it con-
tinues until incorporation is complete. Where a special
charter has been granted the partnership continues
until the charter is accepted by some unequivocal act.®

statute, does not make them partners. First National Bank v. Almy,
117 Mass. 476.

But agent of a projected bank who tried to get charter and failed
was allowed to hold members for his services whether or not they at-
tended the meeting that authorized them. Sproat v. Porter, 9 Mass.
300, 303.

There is a curious old case that is apparently the converse of the
above docti'ine. Association formed to buy and run a steamer. Stipu-
lation that no signer be hable beyond amount of his subscription.
Later, part of them got a charter providing that shareholders be liable
for debts. Held: Original agi-eement did not provide for incorpora-
tion. This changed the agreement. Partners may object to Umited
liability of co-partners. Defendants not bound unless they assented to
new agreement, because it changed scope of the partnership and plain-
tiff subscribers cannot compel defendants to pay their subscriptions.
Southern Steam Packet Co. v. Magrath, McMuU. Eq. (S. C) 93, 100.

* Davison v. Holden, 55 Conn. 103, 112 (cooperative store). See
§17.

5 Arnold v. Conklin, 96 111. App. 373; Barnett v. Lambert, 15 M. &
W. 489; Reynell v. Lewis, 15 M. & W. 517.

^ The members are individually hable for debts incmred before

27

§ 11] ASSOCLITIOXS FOR PROFIT [Ch.u'. II

When an association is incorporated a formal convey-
ance is necessary to pass title to its real estate to the
corporation.^

§ 11. Formal Associations for Profit

A form of group organization has developed which has
taken on the feature of transferable shares and by the
stipulations of elaborate trust deeds has endeavored as
far as possible to adopt the desirable characteristics of
corporations. These associations in sunple forms were
used in some States, notably ^Massachusetts at an early
date.

"So when companies have been formed without in-
corporation, consisting of considerable numbers, for
the purchase of wild lands, with a view to a resale or
other like purpose, the grant is made to trustees in
trust for several members designated and a certificate
of such right to an aliquot part of the beneficial in-
terest is usually issued by the trustees to the several
parties, indicating what aliquot part each holds in such
trust property or beneficial interest; and such certifi-
cates are well understood as muniments of property."^

One of the earliest examples of this form of combina-
tion in this countrj^ was that used by the original
Sugar Trust - and the original Standard Oil Trust. ^

but not after incorporation. Durham Co. v. Clutc, 112 X. C. 440, 17
S. E. 419.

Vote to accept charter, but no formal organization under it or
tran.sfer of assets. Held partnership. Willis v. Chapman, 68 Vt. 459,
35 Atl. 4.59.

' A joint stock company was incorporated. Land stood in name of
trustees for the former. No deed to latter executed. Held: No title
in corporation. Frank v. Drenkhahn, 70 Mo. 508.

• Attorney General v. Fetleral St., 3 Gray 1, 46.

» People V. North River Sugar Refinmg Co., 121 N. Y. 582, 623, 24
N. E. 834.

» State V. Standard Oil Co., 49 Ohio St. 137, 178, 30 N. E. 279.

28

Chap. II] FORMAL ASSOCIATIONS FOR PROFIT [§ 11

Most of the members composing these associations
were corporations. The combinations were held to be
illegal under State laws prohibiting monopolies and
the corporations composing them were dissolved.

It has been earnestly contended that the trust deeds
by which these organizations are created violate the
rule against perpetuities and that forbidding restraints
upon alienation unless limited to twenty-one years
after a life or lives in being at the creation of the trust.
In a leading case the court said:

''Is the trust void as creating a perpetuity, or im-
posing an illegal restraint upon alienation? The right
of a shareholder to convey his own shares, or interests,
under the trust is in no way restricted, but it is con-
tended that illegality is found in the circumstance that
no sale of the corpus of the trust, and no termination
of the trust, will necessarily occur within the period of
a life or lives in being at the time of the creation of
the trust and twenty-one years, and that the provision
that the certificate holders shall not have partition of
the land, and can compel its sale only by a three-
fourths vote, works an illegal restraint upon alienation.

"The trustees take the legal title to allow the asso-
ciation through its directors to manage the land and
to enjoy its rents and income, and to sell the land free
of trusts at the will of the association, with a further
provision for the termination of the trust by vote of the
association at any time after July 1, 1895. Leases for
more than five years, and sales, can be made only in
accordance with an affirmative vote of three-fourths
of the shares, and a like vote is necessary to terminate
the trust. The substance of the situation is that the
shareholders for the time being have the whole equi-

29

§ 11] ASSOCIATIONS FOR PROFIT [Chap. II

table estate in the corpus of the trust, and can at all
times sell and transfer their equitable estates at their
own pleasure; and the trustees hold the legal title in
fee simple in trust to do with the land whatever may
be required by the owners of the equitable estate, which
owners have full capacity, at all times and at their
own option, to require a sale of the land discharged of
the trust, or the immediate termination of the trust
after a period of five years and a few days, the owners
of the equitable estate being a voluntary association,
the beneficial interests in which are represented by
shares, and the association acting by vote of the share-
holders. That the directions of the association to the
trustees are to be given by three-fourths votes, rather
than by majority votes, is immaterial, since it cannot be
said that one is more improbable than the other : either
is a reasonable way of declaring the will of the asso-
ciation, and there is no provision that a vote to sell or
to end the trust must be passed within any stated
period, or at all.

"Such a trust for the convenience of an unincor-
porated association in renting and selling the land,
under which the land is held for no other purpose, and
where the income is not accumulated but is distrib-
uted as it accrues, and where the land is to be sold free
of trusts at the will of the association, and where the
whole equitable interest in the trust is at every moment
vested absolutely in those who at that moment are
shareholders, and never can become vested in any other
persons save by act of the absolute owners or by opera-
tion of law upon their property, and not by force of
any hmitation contained in the deed of trust, the equi-
table interests so vested being also constantly vendible

30

Chap. II] FORMAL ASSOCIATIONS FOR PROFIT [§11

by their several owners without let or hindrance, as
well as subject to their debts and passing like other
property upon death by virtue not of the deed of trust
but of the general laws governing the disposition of the
property of decedents, withdraws no property from
commerce, and is not within the reason of what is
called the rule against perpetuities. The trust in-
volves no future limitations, no restraint upon aliena-
tion, and no accumulation either of income or of prin-
cipal. The provisions by which the trust fund may be
at some time held for the benefit of persons not share-
holders at its inception, and who may become such at a
period more remote than that allowed by the rule, are
not future limitations made by the trust deed in the
sense in which the word ' limitation ' is used in speaking
of the operation of the rule. If there shall ever be a
shareholder other than those in whom the whole
equitable estate was absolutely vested at the inception
of the trust, that shareholder will not take his interest
by virtue of a limitation in the trust deed, but because
of his succession by virtue of the general principles of
law to the property of the original shareholder. The
new shareholder, with reference to the rule, is in the
same situation as a person who, after the expiration of
all lives which were in being when a fee or an estate
tail was created, and of a further period of twenty-one
years, takes the fee by the operation of the law which
makes property vendible by or descendible from the
owner, and not by virtue of a limitation in the instru-
ment which created the fee. The entire ownership is
never for a moment uncertain, nor unvested, and at
every moment each owner can freely dispose of his
property, and at each moment it can be transferred to

31

§ 11] ASSOCLITIOXS FOR PROFIT [Chap. II

his creditor by the ordinary process of the law, and at
each moment the trust can be terminated at the v^ill of
the owTiers of the equitable interest." ^

Although this decision was by only a majority of the
court, it has been frequently cited since in Massachu-
setts without criticism and may be assumed to be the
law in that State. In the onl}' other decision on the
point in which a business enterprise was concerned,
the lUiriois court said: ''"\Miere there are persons in
beuig at the creation of an estate capable of convej'ing
an immediate and absolute estate in fee in possession
there is no suspension of the power of alienation and
no question of perpetuities can arise." '"

The contention that these trusts, unless limited in
duration to the period permitted by the Rule against
Perpetuities, are illegal as restraints upon alienation
because of the provision usually inserted that the
shareholders shall have no right to demand partition
or other di\i.sion of their respective shares before the
termination of the trust in the manner pro\'ided therein
which without an express limitation of duration to a
life or lives in being and twentj^-one years thereafter
might exceed that period. There are several English
cases relating to non-profit associations where the trust
was held invalid because of restrictions on the right to
wind up the association.

A gift by will for the benefit of the Penzance Library
was held void because the library was established for
the use of subscribers only and one of the rules pro-

* Howe t'. Morse, 174 Miiss. 491, 55 N. E. 213. (The report of this
case contains the full text of a real estate trust deed, though not of the
most imjiroved tj-pe).

* Hart V. Seymour, 147 111. 598, 35 N. E. 246 (real estate develop-
ment association). Ace. Gray, Perpetuities, 3d ed., § 509 L. See
§ 37, note 1.

32

Chap. II] FORMAL ASSOCIATIONS FOR PROFIT [§11

vided that it should not be broken up as long as ten
subscribers remained. ** A bequest to the Tunstall
Athenseum and Mechanics Institution was held void
for perpetuity the institution being a voluntary asso-
ciation and one of the rules providing that it should not
be dissolved without the consent of nine-tenths of the
members present at a meeting.^

Of these cases the court in Howe v. Morse says : ''They
were gifts to societies whose members took no personal
beneficial interest in the property, which must be kept
for the purposes of the society, and could not be dis-
posed of by the members for the time being. These
cases, there being no public charity, were simply
private trusts and the gifts were bad because the mem-
bers for the time being did not have power to alienate
the estate." This court further said: ''We express no
opinion upon the contention that the interests of the
shareholders are real estate and that an agreement not
to make partition may be open to objection under the
law as to perpetuities and restraints upon alienation.
These are matters which upon any theory cannot make
the whole trust illegal." That is, the court did not
decide whether or not the provision depriving the
shareholder of the right to partition might be declared
void. As the case before them was a bill to enforce the
right to dissolution regardless of this stipulation, it is
hard to see why the court did not also decide that
question in entering its decree.

Until the question is decided in other jurisdictions,
however, it is safer to limit the duration of the trust to
the period permitted by the Rule against Perpetuities,

6 Carne v. Long, 2 D. <F. & J. 75, 79.

7 In re Button, 4 Ex. D. 54, 58. Ace. Carrier v. Price (1891), 3 Ch.
159, 169.

33

§ 11] ASSOCIATIONS FOR PROFIT [Chap. II

and this seems to be the usual practice. In our kaleido-
scopic business life the enterprise will probably be
reorganized well "^dthin the time limited. The limi-
tation usually adopted is twenty years after the death
of the survivor of certain persons named, who are usu-
ally the children of trustees or prominent shareholders.
Since there might be inconvenience in tracing the lives
of these individuals not officially connected with the
trust if a question as to the proper tune for termination
of the trust should ever arise, a more satisfactory form
would seem to be that employed on page 407 of the
Appendix of Forms limiting the trust to twenty years
from the death of the last sur\dvor of the trustees named
''and such other persons now living as shall hereafter
become trustees of these presents before any person
or persons not now living shall have become the only
trustee or trustees thereof or the offices of trustees
thereof shall have become entirely vacant whichever
of the said periods shall first expire and at the expira-
tion of the time so limited the said trusts shall ter-
minate." It i^ important in using this form to recall
that it must be so phrased that no interval could exist
when all the present trustees are dead and none of their
successors then in office were living at the date of
the creation of the trust though subsequent trustees
might be men who were living when the trust was
created. Such a limitation has been held void for
uncertainty.^

An examination of recent forms of such trust, copies
of which are appended, will show how closel}^ such an
organization can be made to resemble an incorporated
company. It is created by a declaration of trust by

* Ex parte Exmouth, 23 Ch. D. 1.58, 163.
34

Chap. II] FORMAL ASSOCIATIONS FOR PROFIT [§11

two or more individual trustees reciting that they are
to acquire certain property, usually either real estate
or corporate securities, and will hold it upon certain
trusts. The management of the trust estate is vested
usually in the trustees, but sometimes in a separate
board of directors. It is usually provided that the trus-
tees shall be self-perpetuating, but if they are also the
managers, the shareholders frequently have power to
elect or remove them. Subscribers to the trust fund
receive transferable certificates for stock resembling as
closely as possible corporate stock. There is provi-
sion for meetings and certain powers of the shareholders
may be exercised by vote. It is the unlimited liability
of partners for the debts of the concern that has made
the ordinary partnership an unsatisfactory method of
organization for modern business and an impossibility
in dealing with large aggregations of capital of many
investors. Recognizing the danger that the courts
might hold them partnerships even in the face of their
express declaration to the contrary, these trust in-
struments have developed ingenious methods for
eliminating this personal liability of shareholders.^
The following quotation is from the deed of a well-
known real estate trust owning a large office building
in Boston:

''The shareholders hereunder shall not be liable for
any assessment and the trustees shall have no power to
bind the shareholders personally. In every written
order, contract or obligation, which the trustees shall
authorize or enter into, it shall be their duty to stipulate
or cause to be stipulated that neither the trustees nor

3 These forms were originated in England. For an elaborate stipu-
lation see Re Professional Life Assui'ance Co., L. R. 3 Eq. 670, L. R.
3 Ch. 167, 36 L. J. Ch. 442 (clauses 263-266). See §§ 29-31.

35

§ 12] ASSOCIATIONS FOR PROFIT [Chap. II

shareholders shall be held to any personal liability
under or by reason of such order, contract or obligation,
and to refer or cause reference to be made to this
agreement.

"Every act done, power exercised or obligation as-
sumed by the trustees personally under the provisions
of this instrument or in carrying out the trusts herein
contained shall be held to be done, exercised or as-
sumed, as the case may be, by them as trustees and
not as individuals, and every person or corporation
contracting with the trustees, as well as beneficiary
hereunder, shall look only to the funds and property of
the trust for payment under such contract or for the
payment of any debt, mortgage, judgment or decree,
or the payment of any money that may otherwise be-
come due or payable on account of the trusts herein
provided for or any other obligation arising under this
agreement in whole or in part and neither the trus-
tees nor the shareholders, present or future, shall be
personally liable therefor.

" No bond or surety or sureties shall ever be required
of any trustee acting hereunder, and each trustee
shall be liable only for his own acts, and then only for
wilful breach of trust."

The validity and effect of such stipulations will be
considered later.

§ 12. The Law Applicable to Informal Associations
for Profit

The legal problems involved in the form of organiza-
tion in which associations for profit originally developed
arc few and simple. These associations are formed by
the adoption at a meeting of the members of articles of

36

Chap. II] LAW OF INFORMAL ASSOCIATIONS [§12

association or a constitution and by-laws. Such docu-
ments closely resemble those of that large group of
social and fraternal organizations which are clearly
not partnerships, as we shall see hereafter.^ The dis-
tinction between partnerships and these other associa-
tions is that the purpose of the former is the pecuniary
gain of the members ^ while the latter are non-profit as-
sociations. To the former the rules of partnership are
applicable, to the latter the rules of agency only. In
both appears the element of association. Though there
are certain kinds of associations as to the classification
of which the courts have differed in opinion, that is as
to whether they were profit or non-profit associations,^
as to most of them there can be little doubt. When
once you have determined that one of these associa-
tions is a partnership, moreover, few problems arise in
the application to it of the rules of partnership. From
the very informality of their organization, no attempt
has been made to modify by agreement the usual ob-
ligations of partners. Many of the rules regarding
membership in social clubs from which this form of
organization is derived are held applicable. It seems
more appropriate to discuss these rules in detail when
dealing with non-profit associations. Where there is
provision for transferable membership or shares ques-
tions arise as to the beginning and ending of partner-

1 See § 54.
• 2 Tyrrell v. Washburn, 6 AUen 466; Ashley v. DowUng, 203 Mass.
311, 317, 89 N. E. 434.

3 See § 54.

Courts have differed as to fraternal insurance orders. One was held
a partnership in Babb v. Reed, 5 Rawle 151.

One court seemed to assume that a lodge might be a partnership.
Whitcomb v. Smart, 38 Me. 264, 266.

A sociahstic community was held a "universal partnership."
Goesele v. Bimeler, 5 McLean 223, s. c. Fed. Cas. No. 5503, aff'd
14 How. 589.

37

§ 12] ASSOCIATIONS FOR PROFIT [Chap. II

ship liability which will be treated when the rules ap-
plicable to all associations for profit are considered, but
it is usually held that such an association is still a part-
nership in spite of the addition of this feature charac-
teristic of associations but unusual in ordinary part-
nerships.'* In some of the cases, however, there are
dicta that associations for profit with transferable

* T>Trell V. Washburn, 6 Allen 466.

Joint stock companies or societies which are not sanctioned ex-
pressly by the legislature pui'suant to some general or special law are
nothing more than ordinary partnerships and the laws respecting them
are the same. Wells v. Gates, 18 Barb. 554.

Association to build a slaughter house. Constitution provided that
the directors should not incur indebtedness beyond the available
capital of the company and that constitution could be altered at any
regular meeting by two-thirds vote. Du-ectors incurred debts in con-
struction of building and sue shareholders for indemnity. Transfer-
able shares. Held: "The unincorporated association known as The
Union Pork-house Company is to be regarded as merely a co-partner-
ship and subject to the rules governing that branch of the law. It did
not lose its real nature as a partnership because certain of its members
were constituted du-ectors and its members were called stockholders
and a constitution and by-laws were adopted and the number of its
members was large. It might be deemed expedient to appoint directors
to act as the special agents for managing the affairs of the company
instead of leaving each member, as in an ordinary partnership, to act
as general agent for the transaction of business in the ordinary way.
The companj^ too, might be a partnership, although its capital stock
be divided into shares which by the articles of association are made
transferable on the books of the company " (p. 526). Hence the directors
as partners could not bind non-assenting partners to liabilities in vio-
lation of the constitution and that could be amended only at a regular
meeting as it provided (p. 528). McFadden v. Leeka, 48 Ohio St. 513.
28 N. E. 874.

A banking association had transferable shares, but by-laws stipu-
lated that shares could not be transferred without consent of directors.
In an action by the bank's trustee on a note defendant pleaded that
he had taken a transfer of stock from a member on the understanding
that it would be accepted in payment of the note. Held: "While such
an a.ssooiation has some analogy to a corjioration in its by-laws and
rul(,'.s, it is still a mere parlner-sliip and these laws and regulations are
analogous to the terms of an article of co-partnership by which each
mornb(!r binds himself to the others." " In buying into tlie partnership,
the purc;lia,ser of the sto(;k i.s bound to know tiu^ rules and regulations
wliidi govern it. He cannot ask to be made a partner imless upon the
terms imposed upon' his entrance into tlio i)artnersl)ip." Hence he
never became shareholder. Logan v. McNaugiier, 88 Pa. St. 103, 106.

38

Chap. II] LAW OF FORMAL ASSOCIATIONS [§ 13

shares, sometimes called joint stock associations, hold
a position intermediate between corporations and
partnerships.^

§ 13. The Law Applicable to Formal Associations
for Profit

The form of unincorporated association which, it is
believed, has greatest possibilities of future develop-
ment because independent of legislative authorization,
is the association organized under a deed of trust with
transferable shares and elaborate provisions for limita-
tion of liability of the shareholders. These associations
have evolved from the ordinary trust created by will or
inter vivos for the benefit of a class. Since some of them
combine the elements of both partnership and trust
while others are essentially trusts and not partner-
ships, and since there are similar relations which are
merely tenancies in common, it becomes important to
examine in detail the distinctions between them.

5 In re The Associated Trust, 222 Fed. 1012 (D. C. — Mass.);
Spottswood V. Morris, 12 Idaho 360, 85 Pac. 1094, 1102; Hossack v.
Development Association, 244 III. 274, 291, 91 N. E. 439; Cox v. Bod-
fish, 35 Me. 302, 306; Cincinnati Co. v. Citizen's Bank, 11 Ohio Dec.
50; Tenney v. N. E. Protective Union, 37 Vt. 64, 68.

In a suit by heirs to establish rights in an insurance certificate of
membership, the court said: " Many authorities and especially the older
decisions have proceeded on the idea that an association of individuals
must either be a corporation or an absolute partnership and this was
the theory upon which the plaintiff tried this case. The contention of
the plaintiff's counsel is that the members of this association in so far
as their rights in themselves are involved must be regarded as partners
and their legal liability fixed accordingly. This proposition is correct
unless by the by-laws of their organization the pecuniary liabihty of
the members is hmited and is only to be enforced in a certain way and
upon certain contingencies. . . . The by-laws and constitution of
such a society constitute a contract. It is the province of the courts
to enforce and give effect to such a contract according to its evident
meaning." Hammerstein v. Parsons, 38 Mo. App. 332, 335.

39

§ 14] ASSOCIATIONS FOR PROFIT [Chap. II

§ 14. The Distinction between Partnerships and Trusts

It is frequently a difficult problem to determine the
line that divides the partnership from the trust. ^ The
subject has been most frequently considered by the
English courts and by the courts of Massachusetts.
A decision by Judge Loring of the Supreme Judicial
Court of the latter State reviewed the previous deci-
sions and for the first time defined a test for deter-
mining the nature of such organizations. We there-
fore quote at length from the opinion.

''Several instances of such partnerships are to be
found in our reports. In Hoadley v. County Commrs.
of Essex, 105 Mass. 519, one Gordon McKay executed
a declaration of trust by which he declared that he held
his patents for sewing the soles of boots and shoes to
the vamps, his factory where machines were manufac-
tured under these patents and the whole business there-
tofore carried on by him, in trust for such persons as
should buy certificates which were to be issued under
that declaration of trust to the amount of fifty thou-
sand in number, the proceeds to be used in carrying on
the factory and business assigned to and held by the
trustee. The certificate holders were to be known as
the McKay Sewing Machine Association and the
business was to be conducted by an executive committee
to be chosen by them.

"This was held to create a partnership, and for that

* It was held that the Sugar Trust was a partnership, and a corpora-
tion entering the partnership ultra vires was therefore dissolved. Peo-
ple V. North River Co., 121 N. Y. 582, 023, 24 N. E. 834. The court
rrifntioncd but did not deridt! the question in Htate v. Standard Oil Co.,
V.) Ohif) St. 137, 17(), 30 N. Vj. 279. Assoeiat-ions engaged in trade have
long hccii ln'ld j)artiicr,sliii).s whether their jjroperty was vested in the
a.s.s()ci;it ion, Aivord v. Siiiitli, .I Pick. 232, 23r), Taft. v. Ward, 106 Mass.
.^ilS, or in trustees for il, IMiilhps v. Hlatehford, 137 Mass. 510.

■10

Chap. II] PARTNERSHIPS AND TRUSTS [§ 14

reason the shares were held not to be taxable to the
holders of them. For a subsequent case involving the
same association, where the same conclusion was
reached, see Gleason v. McKay, 134 Mass. 419. In
Whitman v. Porter, 107 Mass. 522, certain subscribers
associated themselves together to buy a ferry boat to
be run between Agawam and Springfield; the boat was
to be conveyed to one of the subscribers in ''trust" and
the entire business was to be conducted by these trus-
tees and their officers to be annually elected by the
subscribers. The stock was assignable. These stock-
holders were held to be partners. In Phillips v. Blatch-
ford, 137 Mass. 510, the money to carry on the business
of manufacturing and selling grates was raised by the
sale of transferable certificates issued under a some-
what similar declaration of trust which provided that
the business should be carried on by a board of managers
of whom the trustee was to be one, and the other
members were to be elected by the shareholders.
This also was held to be a partnership. In Ricker v.
American Loan & Trust Co., 140 Mass. 346, the doc-
trine of these cases was extended to a case where the
purpose of the association was to buy cars to be leased
to a specified railroad. The persons providing the pur-
chase money were to have transferable certificates,
which certificates by the terms of the lease to the rail-
road were to be paid in ten annual instalments with six
per cent, interest until paid. The certificate holders
were declared in the declaration of trust to be an asso-
ciation, and all the business was to be transacted by a
board of managers to be elected by them. The prop-
erty of the association was to be held by the American
Loan & Trust Company as trustee. This also was held

41

y(

§ 14] ASSOCIATIONS FOR PROFIT [Chap. II

to be a partnership. Williams v. Boston, 208 Mass.
497, was a similar case. The trust agreement in that
case provided that the trust was established "for the
purchase, developriient and disposition of" the former
site of the Museum of Fine Arts in Boston. The prop-
erty was to be held by trustees, but the shareholders
had a right to remove the trustees, and meetings of the
shareholders were to be held at which the shareholders
might authorize or instruct the trustees in any manner
and alter or amend the declaration of trust, or direct
the trustees to end the trust, sell the property and dis-
tribute the proceeds. The original papers in the case
show these to have been the facts of the case although
they are not stated in the report of that decision. The
property of this association was held to be taxable as
partnership property.

'' In ^Vlayo v. Moritz, 151 ]\Iass.481, on the other hand,
it was held that certificate holders under the declara-
tion of trust there in question were not partners. In
that case an inventor transferred his invention to trus-
tees to whom by the terms of the trust indenture the
patent was to be issued when it was issued. The trust
indenture provided for the issue of scrip to those who
should furnish to the trustees the money necessary for
the more advantageous disposition of the invention.
The trust on which the trustees were to hold the inven-
tion and the money produced by the issue of scrip was
to hold, manage and dispose of the invention or any
part thereof or interest therein upon such terms as to
them (the trustees) or a majority of them should seem
best, the net proceeds to be paid one-half to the inven-
tor and the other half to the holders of the scrip or cer-
tificates. The scrip, called in the trust indenture scrip

42

Chap. II] PARTNERSHIPS AND TRUSTS [§14

or certificates, was transferable. Vacancies in the
office of trustees were to be filled by the remaining
trustees. It was held that the scrip holders were not
partners, and in that respect the case was unlike
Gleason v. McKay, 134 Mass. 419, and Phillips v.
Blatchford, 137 Mass. 510.

" The difference between Hoadley v. County Commrs.,
105 Mass. 519 (involving the same indenture as that in
Gleason v. McKay, 134 Mass. 419), Whitman v. Porter,
107 Mass. 522, Phillips v. Blatchford, 137 Mass. 510,
Ricker v. American Loan & Trust Co., 140 Mass. 346,
and Williams v. Boston, 208 Mass. 497, on the one hand,
and Mayo v. Moritz, 151 Mass. 481, on the other hand,
lies in the fact that in the former cases the certificate
holders are associated together by the terms of the
''trust" and are the principals whose instructions are
to be obeyed by their agent who for their convenience
holds the legal title to their property. The property is
their property. They are the masters. While in Mayo
V. Moritz on the other hand, there is no association be-
tween the certificate holders. The property is the prop-
erty of the trustees and the trustees are the masters.
All that the certificate holders in Mayo v. Moritz had
was a right to have the property managed by the trus-
tees for their benefit. They had no right to manage it
themselves nor to instruct the trustees how to manage
it for them. As was said by C. Allen, J., in Mayo v.
Moritz, 151 Mass. 481, 484: ''The scrip holders are
cestuis que trust and are entitled to their share of the
avails of the property when the same is sold," and that
is all to which they were entitled. In Mayo v. Moritz
the scrip holders had a common interest in the trust
fund in the same sense that the members of a class of

43

§ 14] ASSOCIATIONS FOR PROFIT [Chap. II

life tenants and the members of a class of remainder-
men (among whom the income of a trust fund and the
corpus are to be distributed respectively) have a
common interest. But in Mayo v. Moritz there was no
association among the certificate holders just as there
is no association although a common interest among the
life tenants or the remaindermen in an ordinary trust.
For a decision in this Commonwealth somewhat like
Mayo V. Moritz, uhi supra, see Hussey v. Arnold, 185
y Mass. 202. See also in this connection Makin v. Sav.
Inst., 23 Me. 350; Burt v. Lothrop, 52 Mich. 106.

''There is a case in England (Smith v. Anderson, 15
Ch. D. 247) in which the distinctions between cases
like Hoadley v. County Commrs. and Mayo v. Moritz
was pointed out and established, and that case is now
the established law in England. In Smith v. Ander-
son (decided by the Court of Appeals in 1880), the
trust deed provided for the purchase by trustees of
shares in the capital stock of eleven different sub-
marine telegraph companies. The money was to be
furnished by subscribers to whom transferable certifi-
cates were to be issued. The income derived from the
submarine shares and the proceeds of any sales of them
were to be applied by the trustees (1) in paying six per
cent, interest on the trust certificates issued under the
trust; (2) in redeeming these trust certificates at £120;
and finally, when (3) all the certificates had been re-
deemed, the surplus, if any, was to be divided among
the former certificate holders. It was held that this was
a trust and not a company, association or partnership
which had to be registered under companies act of 1862
(25 & 26 Vict. c. 89) § 4. That act provided that
"No company, association or partnership . . . shall be

44

Chap. II] PARTNERSHIPS AND TRUSTS [§14

formed . . . for the purpose of carrying on any other
business (that is to say, any business other than bank-
ing) that had for its object the acquisition of gain by
the company, association or partnership, or by the in-
dividual members thereof unless it is registered." This
conclusion was reached on the ground that there is a
difference between a partnership where money raised
by the issue of transferable certificates is to be held by
so-called trustees who are really managing agents and
a trust where money raised by the issue of transferable
certificates is to be held by trustees properly so-called,
and that the distinction between the two is that which
we have just stated in detail.

''The decision in Smith v. Anderson is the law of
England to-day, although by reason of some special
facts in that case and the way in which the question
arose doubts as to the conclusion reached in that case
have been thrown out by two or three individual judges.
For the subsequent cases see Crowther v. Thorley, 32
W. R. 330; In re Siddall, 29 Ch. D. 1; In re Jones
(1898) 2 Ch. 83, 91. For two cases where the distinc-
tion between managing agents who hold the legal title
and trustees properly so-called is reaffirmed, see In re
Thomas, 14 Q. B. D. 379, 383; In re Faure Electric
Accumulator Co., 40 Ch. D. 141, 151, 152.

" This brings us to the. question of the character of the
Boston Personal Property Trust. It is plain that it is a
trust and not a partnership. By the terms of the inden-
ture of trust the property contributed by the certifi-
cate holders, or that bought with money contributed
by them (the original trust property could be acquired
in both ways by the terms of the indenture of trust),
was to be held by the trustees in trust to pay the income

45

§ 14] ASSOCIATIONS FOR PROFIT [Chap. II

to the holders of the certificates, and on the termina-
tion of the trust to divide the trust fund or the pro-
ceeds thereof among them. The certificate holders are
throughout called cestuis que trustent. The certifi-
cate holders, or cestuis que trustent, are in no way
associated together, nor is there any provision in the
indenture of trust for any meeting to be held by them.
The only act which (under the trust indenture) they
can do is to consent to an alteration or amendment of
the trust created by the indenture or to a termination
of it before the time fixed in the deed. But they cannot
force the trustees to make such alteration, amendment
or termination. It is for the trustees to decide whether
they will do any one of these things. All that the cer-
tificate holders or cestuis que trustent can do is to
give or withhold their consent to the trustees taking
such action. And the gi\dng or withholding of consent
by the cestuis que trust is not to be had in a meeting,
but is to be given by them individually. As we have
said, no meeting of the cestuis que trust for that or any
other purpose is provided for in the trust indenture.
The trustees of the Boston Personal Property Trust
have a right to sell the trust securities and re-invest the
proceeds, and also a hmited power to borrow on the
security of the trust property. The certificate holders,
or cestuis que trustent as they are called in the trust
deed, have a common interest in precisely the same
sense that the members of a class of life tenants (among
whom the income of a trust fund is to be distributed)
have a common interest, but they are not socii, and it
is the trustees, not the certificate holders, who are the
masters of the trust property. The sole right of the
cestuis que trust is to have the property administered

46

Chap. II] PARTNERSHIPS AND TRUSTS [§ 14

in their interest by the trustees, who are the masters,
to receive income while the trust lasts and their share
of the corpus when the trust comes to an end."

''It was stated in a passing remark made by this court
in Williams v. Johnson, 208 Mass. 544, 552, that in the
trust before the court in that case the certificate hold-
ers were partners within the meaning of that word in
St. 1909, c. 490, Part I, § 27. While that trust provided
for meetings of the shareholders and in that respect for
some association of and among them, an examination
of the original papers shows that it was a trust and not
a partnership. This remark was in no way essential
to the decision in Williams v. Johnson." ^

The essential characteristics of an association for
profit, as defined by Judge Loring, which distinguish
it from a trust are (1) the association of the benefici-
aries, (2) their power as principals to control the man-
agement of the property by the trustees, their agents.

It has been well said by a distinguished authority
that an exact definition of partnership at common law
is impossible.^ The most effective method of analysis
is therefore to determine the characteristics which dis-
tinguish partnership from other similar relations.
Both partnership and trust have for their purpose the
pecuniary gain of the members. In a partnership, how-
ever, the partners stand towards that enterprise in the
relation of co-proprietors^ and that is the relation of
the certificate holders in associations for profit towards
the business of the association. It is evidenced by their
power to control the operations of the enterprise through

2 WiUiams v. Milton, 215 Mass. 1, 6, 12, 102 N. E. 355.

' Lindley, Partnership, Vol. I, p. 1.

* Estabrook v. Woods, 192 Mass. 499, 502, 78 N. E. 538.

47

y

§ 14] ASSOCIATIONS FOR PROFIT [Chap. II

their control of the trustees. In a trust the benefici-
aries have only the right to compel the trustee to ac-
count^ and to charge him with the consequences of
dishonesty or neglect ^ and cause his removal for the
one offense or the other. '^ Within these broad limits
the trustee alone is to determine the method of carry-
ing out the purposes of the trust. ^ Most rules of the
law of partnership are easier to state than to apply.
The tests laid down by Judge Loring will require still
further definition. How much control by the benefici-
aries over the trustee is needed to change a trust into a
partnership? Under many of these deeds of trust the
only way in which the shareholders can expressly con-
trol the action of the trustee is thi'ough their power of
election at the annual meeting. This indeed may prove
in practice a very effectual power to direct his action
during his term of office, but does it come within Judge
Loring' s definition of a partnership? ^

A later decision of the Massachusetts court in draw-
ing the distinction between trust and partnership em-
phasizes control and omits all reference to the element
of association. No issue was involved in the case re-
quiring a decision on this point and it is wholly uncer-
tain whether the omission was accidental or delib-
erate. The court said:

''A declaration of trust or other instrument provid-
ing for the holding of property by trustees for the bene-

» Weaver v. Fisher, 110 111. 146; Hayes v. IlaU, 188 Mass. 510, 512,
74 N. K. !W5.

• Barker v. Barker, 14 Wis. 131.

■> Scott V. Rand, US Mass. 215.

« Life Ass'n of Scotland v. Siddal, 3 DeG. F. & J. 58, 74.

» See tlie opinion of Morton, J. In re The Associated Trust,
222 Fed. 1012 (D. C. — Mass.) and § 16 vost. Sec also Smith v. An-
derson, 15 Ch. D. 247, 284; Hart v. Seymour, 147 111. 598, 35 N. E.
246.

48

Chap. II] PARTNERSHIPS AND TRUSTS [§ 14

fit of the owners of assignable certificates representing
the beneficial interest in the property may create a
trust or it may create a partnership. Whether it is the
one or the other depends upon the way in which the
trustees are to conduct the affairs committed to their
charge. If they act as principals and are free from the \
control of the certificate holders, a trust is created;
but if they are subject to the control of the certificate
holders, it is a partnership. That was explained at
length in Williams v. Milton, 215 Mass. 1. Tested by
the principles there laid down, the Buena Vista Fruit
Company is a partnership and not a trust. It is a vol-
untary association organized under two instruments,
one called a 'declaration of trust' and the other 'by-
laws.' These two instruments provide that the share-
holders representing two-thirds in value of outstanding
shares have power to remove either or all of the trustees
at any time, without assigning any cause, and to appoint
others to fill the vacancy ; to terminate the trust at any
time earlier than that limited for its duration in the dec-
laration of trust, and to terminate it by requiring convey-
ance of the property to other trustees upon new trusts^^_
or to a corporation. A majority of the shareholders at
any time by vote may amend the declaration of trust.
The by-laws may be 'altered, amended, repealed' by
vote of the majority of the shareholders 'at any annual
or special meeting of the . . . shareholders.' These pro-
visions demonstrate that this association is a partner-
ship and not a trust." ^°

It would seem that the element of association is essen- -+-
tial to a partnership. Indeed it is at the very basis of the
conception of an ordinary partnership. The power to

10 Frost V. Thompson, 219 Mass. 360, 106 N. E. 1009. 4.

49

§ 14] ASSOCIATIONS FOR PROFIT [Chap. II

control the acts of trustees or agents follows as a conse-
quence of the existence of another essential element of
the partnership relation, that of co-proprietorship of the
business enterprise. It is to be hoped, therefore, that
the restatement of the law attempted in the opuiion ui
Frost V. Thompson will not be regarded by the court
hereafter as ia any way modifying the definition of
Judge Loring in Williams v. ]\Iilton. The opinion pro-
ceeds to state as a further ground for its decision
that the notes in suit were not the notes of the trustees,
but notes of the treasurer of the association made in
accordance wdth the by-laws, which provided that he
should ''make, sign, endorse and accept for and in the
name and behalf of the company, promissory notes,
drafts and checks in the regular course of its business."
Had these been notes of a treasurer, elected by the
shareholders and not a trustee, it would be clear that
the shareholders would be liable for his acts as partners.
The issue is confused by the fact that the report of this
case refers to two documents, one a declaration of trust,
the other by-laws, but nowhere explains the relation be-
tween the two. This is probably due to the fact that
the original papers in the case disclose no express alle-
gation or finding on this point. From an examination
of the by-laws themselves which are printed in full in
the Appendix, ^^ it is plain, however, that the by-laws
were the by-laws of the trustees and not of the share-
holders and that the treasurer was an agent of the
trustees and a member of the Executive Board ap-
pointed by the trustees, so that although the by-laws
authorized him to sign notes on behalf of the "Com-
pany," this must be deemed the trade name of the

" See p. 363.
50

Chap. II] PARTNERSHIPS AND TRUSTS [§ 14

trustees whose agent he was and not of the share-
holders.

The statement that the organization was a partner-
ship, therefore, must be sustained if at all by reason of
the provisions in the declaration of trust which is
printed in full in the Appendix. ^^ The provisions re-
ferred to by the court are (1) the power to remove trus-
tees at any time without cause and fill the vacancies;
(2) power to end the trust at any time; (3) power to
amend the declaration of trust at any time. There was
apparently no provision for stated election of trustees.

In determining whether mere power to elect trus-
tees gives the right to control which makes the trustees
agents of a partnership, we must first consider a little
more carefully what is meant by right to control. This
phrase has been used to define another distinction, that
between the relation of principal and agent and that of
independent contractors in the ''loaned servant" cases.
As there set forth, the relation is that of agency if the
employer has a right not merely to have certain results
accomplished but the right to direct in detail the method
by which such results are to be attained.

"In determining whether in a particular act, he is
the servant of the original master or of the person to
whom he has been furnished, the general test is whether
the act is done in business of which the person is in
control as proprietor so that he can at any time stop it
or continue it, and determine the way in which it shall
be done, not merely in reference to the result to be
reached, but in reference to the method of reaching the
result. Is this person the proprietor of the business in
which the act is done? By this is meant not merely the

12 Seep. 367.
51

§ 14] ASSOCIATIONS FOR PROFIT [Chap. II

general business which the act is intended to promote,
but the particular business which calls for the act, in
the smallest subdivision that can be made of the busi-
ness in reference to control and proprietorship." ^^

In an ordinary partnership it is clear that each part-
ner has such a right to direct the agents of the firm
except that in cases of dispute the will of the majority
prevails. In associations, by agreement, the share-
holders always act by a majority vote. If this test is
to be applied in the same sense in defining the distinc-
tion between partnership and trust, it would follow
that only those associations are partnerships in which'
the shareholders have the right at any time to direct
the conduct of the business bj'' the trustees in matters
of detail, a right not enjoyed by stockholders in cor-
porations. In some deeds of trust such power has been
affirmatively^ given to the shareholders.^^ In most of
them it has not been expressly given. Can the existence
of the power be implied from the express power to
elect at stated intervals the trustees of the associa-
tion? If we are applying by analogy the distinction
between agency and independent contract the answer
must be no, for this is no more than the right of any
proprietor to select his owm independent contractor for
each specific job. The right to remove a trustee during
his term without cause would not ordinarily be a right
possessed by the proprietor in dealing with liis independ-
ent contractor, but might exist by express agreement
between them and still would not change their relation,
while it existed, from that of independent contractors

'» Shrpard v. Jacobs, 204 Ma.ss. 110, 112, 90 N. E. 392.

>« Hart V. Seymour, 147 111. .598, 609, 35 N. E. 240. Sec Declaration
of TruHt of the Copley Square Tru.st construed in Williams v. Boston,
208 Mass. 497, 94 N. E. 808, jjrinted in the Appendix at p. 333.

52

Chap. II] PARTNERSHIPS AND TRUSTS [§ 14

to that of principal and agent. The following cases on
what is popularly known as ''stock control" of cor-
porations are of interest in this connection.

An action was brought on a contract by a railroad
company to haul plaintiff's cars over all lines of its
road and over all roads which it then controlled or
might thereafter control by ownership, or lease or
otherwise. The Supreme Court of the United States
held that the defendant was not bound to haul cars
over a road of which the defendant owned nearly all
the stock.

*'We are also of opinion that the railroad of the St.
Louis, Iron Mountain and Southern Company is not
controlled by the present Missouri Pacific Company
in such a way as to require that company to haul the
Pullman cars over it, if the contract is binding on the
new company to the same extent it would be on the old
were that company still in existence and standing in
the place of the new. Confessedly the St. Louis, Iron
Mountain and Southern Company keeps up its own
corporate organization. It operates its own road. It
has its own officers and makes its own bargains. The
Missouri Pacific owns all, or nearly all its stock, and
in that way can determine who shall constitute its
board of directors, but there the power of that com-
pany over the management stops. The board when
elected has controlling authority, and for its doing is
not necessarily answerable to the Missouri Pacific
Company. The two roads are substantially owned by
the same persons and operated in the same interest,
but that of the St. Louis, Iron Mountain and Southern
Company is in no legal sense controlled by the Missouri
Pacific.

53

-^

§ 14] ASSOCIATIONS FOR PROFIT [Chap. II

"It is true the bill avers in many places and in many-
ways that the purchase of the stock of the St. Louis,
Iron Mountain and Southern Company was made by
the Missouri Pacific Company for the purpose and with
the intent of getting the control of the road of the St.
Louis, Iron Mountain and Southern, and that the case
is before us on demurrer to the bill. A demurrer admits
all facts stated in the bill which are well pleaded, but
not necessarily all statements of conclusions of law.
What was actually done is stated clearly and distinctly.
The effect of what was done is a question of law, not of
fact. It is a matter of no importance what the purpose
X of the parties was if what they did was not sufficient
in law to accomplish what they wanted. When there
is doubt, the purpose and intention of the parties may
sometimes aid in explaining what was done, but here
there is no need of explanation. The Missouri Pacific
Company has bought the stock of the St. Louis, Iron
Mountain and Southern Company, and has effected a
satisfactory election of directors, but this is all. It
has all the advantages of a control of the road, but that
is not in law the control itself. Practically it may con-
trol the company, but the company alone controls its
road. In a sense, the stockholders of a corporation
own its property, but they are not the managers of its
business or in the immediate control of its affairs.
Ordinarily they elect the governing body of the corpo-
ration, and that body controls its property. Such is
the case here. The Missouri Pacific Company owns
enough of the stock of the St. Louis, Iron Mountain
and Southern to control the election of directors, and
this it has done. The directors now control the road
through their own agents and executive officers, and

54

Chap. II] PARTNERSHIPS AND TRUSTS [§ 14

these agents and officers are in no way under the direc-
tion of the Missouri Pacific Company. If they or the
directors act contrary to the wishes of the Missouri
Pacific Company, that company has no power to pre-
vent it, except by the election, at the proper time and
in the proper way, of other directors, or by some judi-
cial proceeding for the protection of its interest as a
stockholder. Its rights and its powers are those of a
stockholder only. It is not the corporation, in the
sense of that term as applied to the management of the
corporate business or the control of the corporate prop-
erty." 1^

This case was cited with approval in the following
dictum: "The mere fact that Crawford owned a ma-
jority of the stock did not give him the legal control of
the company; nor from such ownership can the legal
inference be drawn that he dominated the board of
directors." ^^

In a case which held that a railroad company was not
doing business in the State merely because it owned
practically the entire capital of a railroad which did do
business there, the court said:

"Is it true that the Gulf Company was the agent of
the Pacific Company or its mere creature in such a
sense that to serve it is equivalent to serving the con-
trolling company? It is a fact that both companies
had common agents and employees to a certain extent,
but the record shows that such employees were paid
in proportion to the business done for each company.
And that while in the service of the companies respec-
ts Pullman Car Co. v. Missouri Pacific Ry. Co., 115 U. S. 587, 596,
29 L. ed. 499, 6 S. Ct. 194.

16 Porter v. Pittsburg Co., 120 U. S. 649, 670, 30 L. ed. 830, 7 S. Ct.
741.

55

§ 14] ASSOCIATIONS FOR PROFIT [Chap. II

tively they were under the exclusive management and
control of the company in whose service they were
engaged, with no power to discharge or employ, the one
company for the other; and that, although the serv-
ice was in a sense common, it was kept distinct and
separate in the control and payment of the employees
while in the separate service of the respective com-
panies.

"It is true that the Pacific Company practically owns
the controlling stock in the Gulf Company, and that
both companies constitute elements of the Rock Island
System. But the holding of the majority interest in
the stock does not mean the control of the active officers
and agents of the local company doing business in
Texas. That fact gave the Pacific Company the power
to control the road by the election of the directors of
the Gulf Company, who could in turn elect officers or
remove them from the places already held; but this
power does not make it the company transacting the
local business.

''This record discloses that the officers and agents
of the Gulf Company control its management. The
fact that the Pacific Company owns the controlling
amounts of the stock of the Gulf Company and has
thus the power to change the management does not give
it present control of the corporate property and busi-
ness." ''

We are, nevertheless, conscious that as a practical
matter the power to elect the trustees at stated intervals
and especially the power to remove them without cause
give real control of the conduct of the enterprise just as

'7 Peterson v. Chicago, etc. Ry. Co., 205 U. S. 364, 390, 51 L. ed.
841, 27 S. Ct. 513.

56

Chap. II] PARTNERSHIPS AND TRUSTS [§ 14

a majority of shares in a corporation give practical con-
trol of its policy, though the directors of a corporation
are not strictly agents of the shareholders. This sug-
gests that perhaps there is some defect in our defini-
tion. Frequently in the development of the law of
partnership, the courts, in their efforts to define the re-
lation in the terms of other relations, have mistaken
effect for cause. In the famous case of Cox v. Hick-
man ^^ the agency of the partners was declared the fun-
damental test of the relation of partnership when, in-
deed, it was only a legal consequence from the existence
of that relation. Here again we are in danger of a like
error. The power to direct and control in partnership
is a legal consequence of the proprietorship of the busi-
ness by the partners. It is an element to be considered
with others in helping us to decide whether that pro-
prietorship exists or not, but is not itself the final' test.
This is the essence of Judge Loring's distinction. J

Trustees, not their beneficiaries, are proprietors of
their business enterprises. Corporations, not their
shareholders, are proprietors of the corporate business.
In the present state of the common law we must say
that the partners as individuals, but jointly, are pro-
prietors of the business of an ordinary partnership.
The trustees of the organizations we are now consider-
ing are in this sense the proprietors of the property of
the organization. This at least creates a presumption
that they are proprietors of its business enterprise. The "1
power to change trustees at stated intervals or to fill
vacancies as they occur should not, it is submitted, be
deemed sufficient to transfer that proprietorship to the
shareholders. It is not inconceivable that a trust under

18 8 H. L. C. 268.
57

§ 14] ASSOCIATIONS FOR PROFIT [Chap. II

a will might provide expressly for the designation of
future trustees by the beneficiaries, as they do now in
effect. It is still plainer that the power to fill va-
cancies as they occur, but not at stated intervals, is
not sufficient evidence of proprietorship to create a
partnership. This was the extent of the power in the
deed in question in Smith v. Anderson where it was held
a trust. ^^ The power to remove at any time without
cause and to fill vacancies seems, however, of a totally
different sort. It is difficult to conceive of independent
action by a trustee under such circumstances and ab-
sm-d to say that he is the proprietor of the enterprise
even while his incumbency continues. On this view the
decision in Frost v. Thompson, supra, is justified.

The power to amend the declaration of trust has
been emphasized as proving the existence of the power
to control and, therefore, of partnership. If the in-
strument would otherwise be deemed to create a trust,
it cannot be that the mere power to change the in-
strument makes it before such change a partnership.
The right to change a trust into a partnership pre-
supposes that until that change it remains a trust.
This common provision in the instruments we are
considering is, therefore, of no value in determining
their true classification.

The real cause of difficulty in this problem is due to a
conflict between the natural desire of courts to effectu-
ate the honest intent of business men and the assumed
necessity of applying to a problem sui generis analo-
gies from other fields of the law. The very difficulty of
securely placing these associations in the domain of
either partnership or trust suggests that they may be-

"• lo Ch. D. 247, 284.
58

Chap. II] PARTNERSHIPS AND TRUSTS [§ 14

long in neither. In dealing with corporations the pecu-
liarities of the situation have been recognized by the
courts and a new relation has been created that of di-
rector and stockholder and the rights and duties of this
relation have become a body of law by themselves.
May it not be that the true solution of the problem
now under consideration lies in the recognition by the
courts of the association as an organization inter-
mediate between partnership and corporation and
distinct from pure trusts with its own rights and
obligations? If this conception were approved these
preliminary problems of identification would be elim-
inated and we could approach the succeeding prob-
lems, such as the liability of shareholders, in the
light of the real intent of the parties, and arrive at
a satisfactory solution.

The dictum of Judge Loring in Williams v. Milton
that the organization before the court in Williams v.
Johnson 2° was a trust and not a partnership, though the
court in that decision said that it was a partnership,
makes it desirable to examine in some detail the terms
of the deed of trust involved in Williams v. Johnson.
The original papers on file in that case show that al-
though the deed of trust contemplated meetings of the
shareholders, the provisions for that purpose were un-
usually meagre and apparently the shareholders pos-
sessed no control over the trustees. The only definite
provision for meetings was contained in Section 22 of
the deed of trust and is as follows:

"Meetings of the shareholders may be called by any
one of the trustees and shall be called upon the written
request of five or more shareholders. Additional

20 208 Mass. 544, 95 N. E. 90. See note 2 of this section.
59

§ 14] ASSOCIATIONS FOR PROFIT [Chap. II

powers may be created in the trustees at any meeting
of the shareholders by a vote or resolution of the hold-
ers of at least two- thirds of the shares then outstanding;
provided that notice of the proposed addition to such
powers shall have been given in the call for the meeting
and that the same is not inconsistent with the acquired
rights of third parties."

In Section 23 it was provided: ''At all meetings of
shareholders each share shall be entitled to one vote
and absent shareholders may vote by proxy authorized
by a writing dated and executed within six months
previous to the meeting at which it is used." There
were in other sections certain provisions for notice to
shareholders of the calling of meetings and other acts
of the trustees. It was also provided that the division
of net income should be discretionary with the trustees
except that in any year when the net income exceeded
two per cent, of the par value of the outstanding shares
the trustees should divide among the shareholders
three-fourths of that net income. In describing the
powers of the trustees it was provided: "The trustees
shall have the absolute control over and disposal of all
real estate and other property held by them at any tune
under this trust." The powers of the trustees were not
as broad as in some other deeds of this sort but in-
cluded the power to acquire other real estate in the
vicinity and ''securities of any corporation, associa-
tion or real estate trust organized for the purpose of
acquiring, holding, managing or improving real estate,
or for the purpose of conducting a lighting, heating,
power or other business directly related to the man-
ag(;mc;nt of real estate, if in their judgment such acqui-
sition will in £\,ny manner tend to facilitate the laying

GO

Chap. II] PARTNERSHIPS AND TRUSTS [§ 14

out, development, management or improvement of the
real estate this day conveyed to them."

These stipulations apparently gave the shareholders
no control whatever over the trustees and although
they had the right of association it would seem that
they could vote only to increase the powers of the trus-
tees. It is this, doubtless, which Judge Loring had in
mind in declaring that the organization was a trust
and not a partnership. On the other hand, the sec-
tion relating to the nature of the shareholders' interest
seems consistent only with the conception of a partner's
interest in the partnership property and not with that
of the beneficiary in a trust estate.

''§2. The shareholders are not to have any legal
title to the trust property itself real or personal, held
from time to time by the trustees and in especial, they
shall have no right to call for any partition; they shall
have no equitable estate in the lands and appurtenances
thereto belonging constituting the trust property,
but their interest shall consist only of an interest in
the money to arise from the sale or other disposition
thereof by the trustees, as herein provided, and of the
rights herein mentioned previously to such sale, and
the shares shall be personal property carrying the
rights, as herein set forth, of division of proceeds and
profits and the other rights and matters concerning the
trust property and shall be transmissible and transfer-
able as personal estate."

The distinction between trust and partnership has
been recognized in other States.^^

21 An English investment trust formed to buy United States mu-
nicipal bonds. Held: "The trust was not a corporation or joint stock
company or partnership, but a trust formed by deed of settlement for
the purpose of securing investments. The trustees were the legal

61

>

§ 15] ASSOCIATIONS FOR PROFIT [Chap. II

§ 15. Declaration of Intention

In all agreements on the border line of partnership,
the parties endeavor to escape liability as partners
by declaring their intention not to be partners. It
is well settled in the law of partnership that such
declaration of intention is not conclusive.^ As
Judge Loring said of such a declaration, "It is
what the parties did in making the trust indenture
that is decisive. If there had been doubt as to
what they did, w^hat they intended to do would
have been a matter entitled to some consideration
in determining what they did." ^

§ 16. Unincorporated Companies under the Bankruptcy Act

A recent case in the United States District Court for
the District of Massachusetts ^ deals indirectly with the
problem. The organization in question was unusual in
form. Certificates had been issued by the trustee of a
real estate trust which were a cross between bond and
stock and carried most attenuated rights of association.
The issue before the court was whether the "Asso-
ciated Trust" was an "unincorporated company"
within the meaning of the United States Bankruptcy
Law, and so subject to involuntary bankruptcy. The

owners of the trust property and the business of the trust was managed
by them and 'the committee' created by the deed for the benefit of
the certificate holders, who were strangers to each other and who en-
tered into no contract between themselves nor with any trustee on
behalf of each other and were not therefore partners." Johnson v.
Lewis, G Fed. 27 (C. C. — Ark.).

On the other hand a real estate trust formed in Massachusetts to
deal in land in Iowa was held a partnership in courts of the latter.
Mallory v. Ru.sscill, 71 la. O:',, (iG, .32 N. W. 102.

> Heecher v. IJu.sh, 4.'5 Mich. ISS, 7 N. W. 785.

* Williams v. Milton, 21.'") Mass. 1. 12, 102 N. E. 3.55.

I In re The As.socialed Trust, 222 Fed. 1012 (D. C. — Mass.).

02

Chap. II] BANKRUPTCY ACT [§ 16

nature of this organization is best defined in the lan-
guage of Judge Morton:

"The character of the respondent is to be gathered
from the trust deed. Under it, the trustee declared
that he would take and hold in trust money paid to him
by other persons to the amount of One Million Dollars,
for which he would issue transferable certificates hav-
ing a face value of One Hundred Dollars, entitled to
interest, and to participate in surplus earnings, and
also entitled to borrow from the Trust sixty per cent,
of the face value of the certificate, and after five years
to receive from the Trust in cash the face value of the
certificate upon the surrender thereof. The trustee is
given very broad powers as to the management of the
property in which the trust funds are invested, with
the right to determine what part of the income shall be
divided and what shall be retained as surplus. He has
no power to bind any of the certificate-holders ; and they
have no power to interfere directly in the management
of the property, and no title to it. A ' Board of Direc-
tors' is provided for, who may be appointed by the
trustee and are removable by him; their duties are
merely to advise the trustee; they are negligible as to
the question here raised. Up to this point there would
seem to be nothing in the organization differentiating
it under the Massachusetts decisions from what may
be called an ordinary trust; that is, the beneficiaries,
cestuis, or certificate-holders (whichever they may be
called) have no interest in the trust property and no
right to joint action for control of it. They are in sub-
stance like beneficiaries in a trust under a will. There
is no organization having a distinct entity apart from
the trustee.

63

§ 16] ASSOCIATIONS FOR PROFIT [Chap. II

" But the declaration of trust also provides that if the
trustee resigns, the certificate-holders may, at a meet-
ing called for the pm-pose, elect a new trustee (Par. 16) ;
that vacancies in the trusteeship may be filled by elec-
tion by a majority vote of the certificate-holders at
meetings duly called (Par. 17) ; that at such meetings a
majority of the outstanding shares shaU constitute a
quorum, and that each share shall be entitled to one
vote which may be cast bj' proxA" (Par. 29) ; that upon
notice in the manner provided special meetings of the
certificate-holders may be called b}^ the trustee and
shall be called on T\Titten appHcation of three or more
certificate-holders ha^Tiig not less than twenty per cent,
of the outstanding shares (Pars. 28, 31, 32); that the
certificate-holders by a three-quarters vote of the out-
standing shares may determine the trust (Par. 33), in-
crease the number of shares and amend the declara-
tion of trust (Par. 36).

" It thus appears (1) that the respondent has a capital
contributed by the certificate-holders. (2) That future
managers are to be chosen by the certificate-holders.
(3) That the character, scope and size of the enterprise
may be changed by the certificate-holders, and that
it may be terminated by them. (4) That these rights
and powers are given to the certificate-holders in the
instrument by which The Associated Trust is con-
stituted.

" The absolute powers of termination and amendment
give the certificate-holders, as it seems to me, the ulti-
mate control of the business of the trust whenever
they choose to take that power into their hands. They
have not yet done so, but the character of the organi-
zation is to be gauged rather by the powers of the

(J4

Chap. II] BANKRUPTCY ACT [§16

certificate-holders, than by the extent to which those
powers have as yet been exercised. The analogy be-
tween the respondent organization and a corporation
is apparent. The certificate-holders clearly possess
many of the most characteristic powers of stockholders.
If the expression 'unincorporated company' in the
Bankruptcy Act does not describe such an organiza-
tion as the respondent, it is difficult to see what mean-
ing can be given to those words. To hold the re-
spondent a partnership within the Bankruptcy Act
would lead to results never contemplated by anybody,
and would impose upon the certificate-holders obliga-
tions which neither they nor the creditors of the Trust
supposed existed. It would be a very unjust result.
To hold that the respondent is not an organization
and is nothing more than a strict trust, is almost as
far from the fact as to hold it to be a partnership.
These certificate-holders voluntarily entered into a
business organization, in which they invested their
money under a contract by which they acquired cer-
tain individual rights against the trustee, and cer-
tain other rights to be exercised by joint action of
all the certificate-holders. 'Unincorporated company'
seems to me exactly to describe what the respondent
is. In re Seaboard Fire Underwriters, 137 F. R.
987.

"I therefore am obliged to hold that the plea and the
motions to dismiss contained in the answer cannot be
sustained, and that the respondent is subject to adjudi-
cation."

Though this case decides merely that the trust was
an "unincorporated" company within the language of
a Federal statute, a conclusion to which no exception

65

§ 17] ASSOCIATIONS FOR PROFIT [Chap. II

can be taken,^ it implies that the law should recognize
such an organization as a distinct entity intermediate
between the corporation on the one hand and the part-
nership and the trust on the other.^ It might be ar-
gued, however, that the reasoning of the court with
reference to the effect of the provisions for election of
trustees and termination of the trust would bring this
trust within Judge Loring's definition of partnership
because the cornet found both elements of association
and control. The answer of the court that this would
lead to results never contemplated by anybody is
equally true of many partnership cases where the par-
ties involved did not appreciate the legal consequences
of their acts. It should also be noted that in this case
counsel on both sides expressly disclaimed any con-
tention that the Associated Trust was a partnership.
If the view above suggested is sound, however, the
organization in question was merely a trust.

§ 17. Association for Profit Distinguished from Tenancies
in Common

Another possible line of distinction in determining
whether or not shareholders in these organizations
have incurred the liabilities of partners is that between
partners and tenants in common. This is one of the
most familiar tests of partnership and in close cases
one of the most difficult to apply. It is plain that mere
joint ownership of property does not make the co-owners
partners.^ It is an incident of ownership that the owner
may derive income from his investment. So the mere

2 See Re Seaboard Fire Underwriters, 137 Fed. 987 (D. C. — N. Y.).

' S(!e § 12, note 5.

» Fall River Whaling Co. v. Borden, 10 Cush. 458 (Mass.).

66

Chap. II] TENANCIES IN COMMON [§17

fact that tenants in common jointly gain by their in-
vestment either by increment to its capital value or by
way of interest or rent does not make them partners.
Partnerships came into the common law as organiza-
tions engaged in buying and selling personal property.
The rights and limitations of joint tenancy of real
estate had become fixed long before. Hence there is
still the element of trade implied in partnership, al-
though it has long since ceased to be limited to the
business of buying and selling merchandise. It may
apply equally well to trading in real estate,^ and Lord
Cockburn said that joint owners of a horse might be-
come partners in the use of the horse if they made a busi-
ness of racing him for money prizes.^ Just where the
line is to be drawn in complicated states of fact be-
tween deriving an income from property owned jointly
and making a profit out of the use of that property in
business it is as yet difficult to state, but that there is a
valid distinction between the two kinds of relation to
property we all recognize and it is established law.^

2 Fall River Whaling Co. v. Borden, 10 Cush. 458 (Mass.).

3 French v. Styring, 2 C. B. N. S. 357; see also Goell.v. Morse, 126
Mass. 480.

* Early Hudson River steamboat company held tenants in common
and not partners. Livingston v. Lynch, 4 Johns. Ch. 573, 592. Sub-
scribers to an unincorporated telegraph company were held tenants in
common and not partners. Such a decision would hardly be expected
to-day if it were a commercial telegraph company. Irvine v. Forbes,
11 Barb. 587, 589. But see modern cases on "farmers" telephone
lines." § 54, note 8.

Proprietors of a grist mill were held tenants in common. Buck v.
Spofford, 31 Me. 34.

A gi-oup contributed in equal shares to buy a vessel and cargo and
send both to California to be sold by an agent. Defendants were sued
on notes given by the agent in payment for cargo. Notes in name of
agent. Held: Liable whether partners or not on principles of agency.
Dictum that tenants in common and not partners. French v. Price,
24 Pick. 13, 20.

Numerous heirs and devisees of three original proprietors of a ferry
continued to operate it. Petition for partition dismissed and cause

67

§ 17] ASSOCIATIONS FOR PROFIT [Chap. II

The law of mining partnerships, as the exception has
been developed in the mining states, affords an example
on the border line between tenancies in common and
partnerships. Co-owners of a mining claim are ten-
ants in common just like tenants in common of any-
other real estate. When they begin to work it and enter
into the business of producing ore and selling it for
profit they, of course, become partners. As the law
has been stated, and is now set forth in the codes, the
operation of the mine constitutes a ''mining part-
nership" between the owners who join in working
it.^ Those who do not join retain the relation of tenants

remanded for an accounting and dissolution of partnership. Bogardus
V. Reed, 145 N. Y. S. 597, 160 App. Div. 294.

* Where an agent locates a placer claim and later agent and prin-
cipal without any contract engage in working it they become mining
partners in the work of mining but not in the ownership of the ground.
M'Mahon v. Meehan, 2 Alaska 278, 286.

On a bill for specific performance of a contract held it did not create
a mining partnership because there was no allegation that the defend-
ant actually engaged in working the mines. Marks v. Gates, 2 Alaska
519, 523.

The holder of a claim to coal-bearing land agreed with two others to
prospect at their own expense for a ledge, after which all three were to
jointly work the ledge. Held: This did not create a relation of land-
lord and tenant but tenants in common or partners in mining and
therefore the plaintiff had mistaken his remedy. Henderson v. Allen,
23Cal. 519, 521.

Tenants in common of a mine who join in working it without formal
agreement are a mining partnership which is not founded on the delectus
personae, but shares are a.s.signable and assignment of shares or death
of shareholder do not produce dissolution. Hence members have
limited authority to bind the others and it would not include authority
to em})loy an attorney to prosecute claims. Charles v. Eshleman, 5
Col. 107," 111.

An agi'eement l)y one to furnish services and others money for work-
ing a mine constitutes a mining j)artnership. The members are liable
for labor enij)loyed in the work. L>^nan v. Schwartz, 13 Col. App.
318, 321, 57 Pac. 735.

"In order to create a mining partnership it seems to be necessary
that there be an agreenujnt to work the mine for the joint profit of the
parties. Otlierwisc; the owners of the j^roperty acquired in .such man-
ner JUS i.s lien- chargcHJ are ((^nants in common." "Indeed it seems to
be held that the mere use of ijroperly so obtained for partnership pur-

08

Chap. II] TENANCIES IN COMMON [§ 17

in common.^ The partnership may include others than
the tenants in common of the mine.^ A smelting firm
has been held a ''mining partnership." ^ In apply-
ing the doctrine to oil drilling,^ it has been held that
the co-tenants became partners even where they
divided the product in specie. ^° An attempt has been

poses does not convert it into partnership assets in the absence of an
agreement to make it partnership property." Doyle v. Burns, 123 la.
488, 495, 99 N. W. 195.

Cessation of work amounts ipso facto to a dissolution of a mining
partnership formed under the statute merely by operation, but a tem-
porary discontinuance will not. Nielson v. Gross, 17 Cal. App. 74, 118
Pac. 725.

A mere prospecting or "grub stake" contract is not a mining part-
nership and the contractors do not become partners until they discover
and actually work a mine. Hence the defendants were not hable for
supphes furnished the prospector. Hartney v. GosKng, 10 Wyo. 346,
358, 68 Pac. 1118.

A miner's agreement referred to "prospecting partners" of the dis-
coverers of a claim. Held that those who furnished money and pro-
visions to the prospectors to enable them to search for gold were meant
though they might not technically be partners. Boucher v. Mulver-
hill, 1 Mont. 306, 310.

6 Mader v. Norman, 13 Idaho 585, 590, 92 Pac. 572; Anaconda Co.
V. Butte Co., 17 Mont. 519, 43 Pac. 924; see Fu-st Bank v. G. B. V. Co.,
89 Fed. 449 (D. C. — Idaho). So of operation by one tenant in
common under a deed of trust. Peterson v. Beggs, 148 Pac. 541
(Cal.).

' A partnership was held to exist within the rule of Meehan v.
Valentine, 145 U. S. 611, 36 L. ed. 835, 12 S. Ct. 972, to operate a
mine. It was said to be clearly a mining partnership under the special
rule. It was not necessary that all should have had an interest in the
mining lease if interested in the operating. The special rules are set
forth on p. 413. Hence defendants were liable for labor claims. Bent-
ley V. Brossard, 33 Utah 396, 411, 94 Pac. 736.

* An association to operate a smelter and mines is a mining partner-
ship. Review of rules as to such. Superintendent can bind members
on a contract for charcoal for use in the smelter. Higgins v. Armstrong,
9 Col. 38, 46, 10 Pac. 232.

^ Shareholders in a corporation who bought its oil leases on a wind-
ing up and operated them and divided the net profits were held a min-
ing partnership. The rule that mere operation creates it was stated.
Kirchner v. Smith, 61 W. Va. 434, 444, 58 S. E. 614.

" Oil miners who divided the oil in specie by receiving separate cer-
tificates for the share of each from the pipe line company were held
mining partners under the theory that mere operation of a mine by co-
owners made them such, citing the cases under Western codes without
mentioning the latter. The general rules distinguishing mining part-

69

§ 17] ASSOCIATIONS FOR PROFIT [Chap. II

made to extend the doctrine of mining partnerships to
proprietors of irrigation ditches, but the courts seem
uncertain of their ground. ^^

The apphcation of the distinction between tenancies
in common and partnerships to organizations formed
under deeds of trust will arise in two different kinds of
enterprise. One of the most common of these associa-
tions is that formed for the purpose of constructing and
owning large office buildings or hotels in cities. It is
hard to see why a distinction should be made between
two men who jointly own an office building and derive
a profit from their rentals less their expenses and two
hundred men who hold transferable shares in a trust
which owns a similar building. Yet as great a lawyer
as Jessel, M.R., seems to have thought such a distinc-
tion valid.

"There are many things which in common colloquial
Enghsh would not be called a business even when car-
ried on by a single person which would be so called
when carried on by a number of persons. This is a dis-
tinction not to be forgotten even if we were trying the
question by ordinary use of the English language. For
instance, a man who is the owner of offices, that is, of a
house divided into several floors and used for commer-

nerships are laid down. Childers v. Neely, 47 W. Va. 70, 72, 34 S. E.
828.

Tonants in common of an oil lease dividing the oil between them
were held partncsrs and it was said that the rules of mining partnership
applied and that the shares were freely transferable. Ervin v. Master-
man, 10 Ohio Cir. Ct. G2, 70.

" Tenanls in common of a water ditch selling water may be re-
garded a.s partners. One tenant allowed to recover from another his
Hhar(! in profits received from sales of water. Abel v. Love, 17 Cal.
233, 237.

Owncns of shares in irrigation ditch held tenants in common and
not j)artnerH because shares freely salable. Uradh^y v. Harkness, 26
Cal. 09, 77. A later case says they an; like mining partnerships. Mc-
Conncll ;;. Denver, 35 Cal. 305.

70

Chap. II] TENANCIES IN COMMON [§ 17

cial purposes, would not be said to carry on a business
because he let the offices as such ; but suppose a com-
pany was formed for the purpose of buying a build-
ing or leasing a house to be divided into offices and to be
let out, should we not say if that was the object of the
company that the company was carrying on business
for the purpose of letting offices or was an office letting
company, trying it by the use of ordinary colloquial
language. ..."

"When you come to an association or company
formed for a purpose, you say at once that it is a
business because there you have that from which
you would infer continuity." ^^ It must of course be
remembered that the Master of the Rolls was not
deciding the direct question of partnership or not, but
whether there were persons associated for the pur-
pose of carrying on a business within the meaning of
a certain statute.

A joint stock company or association was formed
to buy a tract of land, sell lots until all costs and ex-
penses were paid and then divide the balance of the
land among the shareholders. It was held by the Su-
preme Court of the United States to be a partnership.^^
It has been held in Massachusetts, that a real estate
trust formed for the purpose of erecting a hotel and
leasing it was taxable in Boston as a partnership. The

12 Smith V. Anderson, L. R. 15 Ch. D. 247, 259, 273. (The de-
cision of the Master of the Rolls was reversed on appeah See § 18,
note 1, especially the opinion of Cotton, L.J.)

Owning and renting an office building was held "doing business"
within the meaning of the Federal Corporation Tax of 1909. Zonne v.
Minneapohs Syndicate, 220 U. S. 187, 55 L. ed. 428, 31 S. Ct. 361.

13 Clagett V. Kilbourne, 66 U. S. 346, 349, 17 L. ed. 494.

A similar organization with transferable shares was assumed to be
a partnership in Merchants National Bank v. Wehrmann, 202 U. S.
295, 300, 50 L. ed. 1036, 26 S. Ct. 613.

71

§ 17] ASSOCIATIONS FOR PROFIT [Chap. II

court said: ''There is no doubt that they are joint
owners of property for whose benefit the business is
being carried on, in which profits or loss will affect them
all proportionally through the increase or diminution
of the value of their respective interests in the trust.
In the leading and substantial features that distinguish
an ordinary partnership this association is within the
spirit and meaning of the law of partnership. The limi-
tations upon the power and liability of individual mem-
bers and the attempt to avail themselves of many of the
privileges of stockholders in corporations relate more
to details and to the machinery of management than
to the substantive purpose of the enterprise." ^* This
case Judge Loring approved in the opinion above
quoted, but on the ground that the original papers
showed that the shareholders had the right to instruct
and remove their trustees, amend the declaration of
trust or direct the trustees to sell the property and dis-
tribute the proceeds. He also notes that the declared
purpose of the trust was "the purchase, development
and disposition of" certain real estate. ^^ In drawing
these declarations of trust, lawyers have been prone to
expand and multiply the declared purposes of the trust
and the powers of the trustees in imitation of the com-
mon practice in drawing charters of corporations. In
many instances it will be found, therefore, that the

" Williams v. Boston, 208 Mass. 497, 500, 94 N. E. 808.

Bill to redeem from sale under attachment certain lots sold by a
real estate trust. It was contended that the real estate trust was in-
valid. It was an association with power to direct and control. Held:
The trust was not executed by the statute of uses. The beneficiary
was a partnershif) (p. 010) of determinable members capable of taking
and the trust ecvs were active (p. Oil). The power of shareholders to
remove trust(!(!H does not affect (heir k^gal title; (ill exercised (p. 613).
Not a perjjetuit.y because lots inmiediatcly salable. No restraint on
alienation fp. 014). liart v. Seymour, 147 111. 598, 35 N. E. 246.

"> Wilhams v. Milton, 215 Mass. 1, 7, 102 N. E. 355.

72

Chap. II] HOLDING COMPANIES [§ 18

scope of the enterprise as set forth in the instru-
ment under which it is organized includes that which
is clearly appropriate to a partnership even though the
specific purpose the shareholders contemplate and in
fact undertake may be more properly described as a
mere investment.

§ 18. Holding Companies

Such organizations as are above described are now
frequently formed to serve as holding companies in con-
solidating numerous public service corporations, and in
view of the present trend of legislation this use of unin-
corporated associations seems likely to be extended.
The specific object of such organizations is to acquire
and hold shares of stock in certain classes of corpora-
tions and after paying the slight expenses of the asso-
ciation to redistribute in dividends to its shareholders
the dividends and interest received from the shares of
stock and bonds it owns. This in itself seems merely
an investment rather than a business and was so held
in Smith v. Anderson.^ Lord Justice Brett said: "I
confess I have some difficulty in seeing how there could
be an association for the purpose of carrying on a busi-
ness which could be neither a company nor a partner-
ship, but I should hesitate to say that, by the ingen-
uity of men of business, there might not some day be
formed a relation among twenty persons which, with-
out being strictly either a company or a partnership,
might yet be an association.

"Where it is a joint stock company, or a corpora-
tion, or quasi corporation, and the individuals are mere
shareholders, then the gain which is acquired by the

1 L. R. 15 Ch. D. 247, 274.
73

§ 18] ASSOCIATIONS FOR PROFIT [Chap. II

business is a gain by the company, and not a gain by the
individual shareholders. But where it is an ordinary
partnership, or where it is an association which, not
being a joint stock company or corporation, is more
like to a partnership, there the gain will not be by the
whole body as distinct from the individuals, but by
the individual partners.

''Let us now consider whether in the present case
there were any persons associated for the purpose of
carrying on any business such as is described in this
clause. If there were such persons, they must have
been either the trustees or the certificate-holders. In
my opinion neither the one nor the other were asso-
ciated together for the piu-pose of carrying on such a
business as is described in the act. I will take first the
trustees themselves. The trustees were not, as I con-
strue the deed, to enter upon a series of acts which, if
successful, would obtain a gain. They were joined to-
gether for the purpose of once for all investing certain
money which was delivered into their hands, and not for
the purpose of obtaining gain from a repetition of in-
vestments. In other words, they were not associated
together for the purpose of speculating in shares. That
was not their business. There was no reason why, when
they had once made an investment, it should, under
ordinary circumstances, ever be changed. Therefore
it seems to me that the primary and substantial object
of their associating together was not for the purpose of
carrying on a business which, if successful, would result
in the acquisition of gain.

"But supposing that this was such a business as is
mentioned in the act, were the certificate-holders the
persons who were to carry it on? It seems to me that

74

Chap. II] HOLDING COMPANIES [§ 18

they certainly were not. I take it that the persons
called trustees in the deed are clearly trustees as dis-
tinguished from agents and from directors. The dis-
tinction has been pointed out by my Lord, and I en-
tirely agree with it. If, indeed, although they were
called trustees, the duties which they had to perform
were really those of directors, then, although they were
called trustees, the legal effect of the deed would be that
they would be directors, and if they are directors they
are agents ; but here it seems to me clear that according
to the true construction of the deed they were not direc-
tors or agents, but trustees. If that be so, the certifi-
cate-holders, even if they were associated at all, were
not associated for carrying on the business. It was not
their business. They could not have been made liable
for any contract made by the trustees. It was of course
urged that they would be liable as undisclosed prin-
cipals. But that assumes that the persons who made
the contracts upon which they are to be liable are their
agents authorized to bind them by their contracts,
which is obviously not true. Therefore, even if there
be here a business within the meaning of the section,
yet it is not carried on by the certificate-holders, who
are of a larger number than twenty, but by the trus-
tees, who are not of the number of twenty or more;
and therefore in either view the case is not within the
statute."

Lord Justice Cotton said: ''If it appeared that the
real object of the deed was that the trustees should
speculate in investments, even though confined to this
particular class, the case would have stood in a very
different position. In my opinion there is nothing of
that sort. This is not a provision that they shall make

75

§ 19] ASSOCIATIONS FOR PROFIT [Chap. II

a profit by selling and buying again securities of this
class, whenever, in their opinion, the turn of the market
makes it advisable so to do. The deed is in substance
a trust deed, providing how they are to hold as trustees
specified securities of a large amount with provisions
enabling them in certain events to sell some of the se-
curities, and enabling them when that is done, but only
under special circumstances, to reinvest, not to specu-
late. In my opinion that is not a deed providing for
carrying on a business within the meaning of the act;
it is a deed providing for the holding of trust property
with such provisions only as are necessary to enable
that to be conveniently done. I am of opinion, there-
fore, that there is no carrying on business within the
meaning of the act."

The power to sell as well as to buy these securities
is ordinarily so essential to the effective operation of
one of these holding companies that in most instances
it will be found that the declaration of trust contains a
trading element.^ If the organization is a partnership,
any increase in the value of the securities comprised
in the trust fund is a profit to be divided among those
entitled to profits; if a trust, it is an accretion to prin-
cipal and belongs to those who own the corpus of the
trust fund.^

§ 19. Application of Law of Partnership to Associations
for Profit

Not only is there doubt as to the exact definition of
those associations operating under deeds of trust that
are partnerships, but there are many questions still to

2 Sc(! § 34, noto 1.

» WilliiimH V. Mill on, 21.5 Mtuss. 1, 11, 102 N. E. 355.

70

Chap. II] MEMBERSHIP [§20

be settled regarding the effect of the provisions by which
these documents purport to modify the usual rules of
partnership.

In the absence of any such stipulation in the articles
of organization, constitution and by-laws or deed of
trust, whichever may have been made the mode of
organization adopted, it is generally held, when once
the court has determined that the particular associ-
ation in question is a partnership, that the ordinary
rules of the law of partnership apply. When, how-
ever, one modification is made, such, for example, as
the usual provision for transferable shares, certain
other modifications of the law of ordinary partnerships
are generally implied.

§ 20. Membership in Informal Association for Profit

One who signs the constitution of an informal asso-
ciation for profit becomes a member from the date of
signature.^ New members were added to a joint stock
association formed to publish a newspaper by the
trustees signing an agreement to hold in trust for them
as well as for the others.^ In general, membership in
an association is a question of fact for the jury.^ A wife

1 Though his name was not voted on till later. Beaman v. Whitney,
20 Me. 413, 420. But signing a book and paying a doUar for member-
ship in a cooperative store did not make defendants partners where
there were several blank pages between the constitution and list of
signatures without evidence of intent to subscribe to articles of partner-
ship. Moore v. May, 117 Wis. 192, 94 N. W. 45.

Patrons of a cheese factory operated by a voluntary association do
not necessarily become members of the association and therefore
partners. CooUdge v. Taylor, 85 Vt. 39, 80 Atl. 1038, 1045.

2 Holt V. Blake, 47 Me. 62.

^ Subscribers to shares in an express company who had paid assess-
ments were held partners and so liable for its debts. Frost v. Walker,
60 Me. 468, 470; contra, it has been said that subscribing is merely a
declaration of intention to become a partner. Appeal of Hedge, 63

77

§ 21] ASSOCIATIONS FOR PROFIT [Chap. II

of a shareholder, who herself held stock, was held not
liable for debts of the association because a wife cannot
be a partner with her husband.*

§ 21. Property Rights in Associations for Profit

The fact that the shareholder in associations organ-
ized under deeds of trust is a cestui que trust as well as a
member of an association has caused doubt as to the
nature of the shareholder's interest in the assets of the
association. The uncertainty of the courts as to the
line of distinction between pure trust and partnership
has added to the confusion. The ordinary rule of part-
nership is that a partner individually owns no part in
the legal or equitable title to the personal property of
the firm but that the firm as an entity holds that title.
The nature of the partner's interest is a chose in action,
a right to an accounting and to receive his share in the
net assets after payment of debts. ^ This rule has been
applied in defining the nature of the interest of a
shareholder in an association.

A joint stock company or association was formed to
buy a tract of land, sell parts until all cost and expenses
were paid, and then divide among the stockholders.
Title was taken in name of trustees. A separate cred-
itor of a shareholder got judgment and levied on the
land, claiming a lien on his share. It was held that it

Pa. St. 273, 277; see also Galveston City Co. v. Scott, 42 Tex. 535,
553.

Shar('hol«J(>rs of a joint stock company are liable as partners. If the
company has engaged in the business for wliich it was formed, each
Bubscriber for shares with the intent to share profits and each con-
tributor to the funds is liable as a partner. So is one who takes part
in meetings or acts as manager. Hunnewell v. Willow Springs Co., 53
Mo. Ai)p. 245, 248.

* Norwood ('. Francis, 25 App. D. C. 463, 476.

» Pratt V. McCuinness, 173 Mass. 170, 172.

78

Chap. II] PROPERTY RIGHTS [§ 21

was a partnership and that a purchaser at an execution
sale got the same interest as the debtor had, namely, a
share in the net assets after an accounting, and that
the remedy was to go into equity for an account. ^

The legal title to partnership real estate is never in
the firm as an entity but may be vested in the individ-
ual partners who hold in trust for the firm or in some
express trustee for the firm. Unless by the form of con-
conveyance a partner holds the legal title either alone
or as tenant in common the English rule is that his in-
terest before dissolution in the real estate held in trust
for the firm is the same as his interest in the personal
property.^ In most States in this country, for purposes
of descent, it has been treated as realty subject to cer-
tain exceptions for the benefit of creditors.^ A con-
trary result was reached, however, in a case relating
to a real estate trust formed in Massachusetts to deal
in land in Iowa. The widow of a shareholder claimed
dower in land conveyed by the trustee. The court
said: ''The enterprise was a partnership the object of
which was to buy and sell real estate; and the in-
terest of the individual members of the partnership
was the proceeds of the sale of the land. The written
contract expressly provides that the trustee shall be
invested with the legal title of the land purchased
and the same shall be sold and conveyed by him and
a distribution of receipts from the land sales shall
from time to time be made to the members of the
association in proportion to their respective interests.
It was not contemplated that there should at any time
be any partition or division of the lands among the

2 Clagett V. Kilbourne, 66 U. S. 346, 349, 17 L. ed. 494.

* Darby v. Darby, 3 Di-ew. 495.

4 Shearer v. Shearer, 98 Mass. 107, 115.

79

§ 21] ASSOCIATIONS FOR PROFIT [Chap. II

members of the partnership, but the contract plainly
provides that the lands shall be sold by the trustee and
the proceeds divided among the several partners. Be-
ing partnership land, it must be treated as personal as-
sets, not only so far as the rights of creditors of the
partnership are involved, but, so far as necessary, for
the purpose of carrying out the provisions of the part-
nership contract. It is plain to be seen that if the claim
of plaintiff be well founded, a husband could not be-
come a member of a partnership of this character with-
out associating his wife with him as a member of the
firm. It is not claimed that the contract of partner-
ship is void. Contracts of partnership for buying and
selling real estate as a business are as valid and bind-
ing upon the parties ^s any other legal contracts.
The parties to this contract expressly provided that
the title to the land should be held by a trustee and that
he should sell and convey a clear and absolute title. The
contract itself refutes the idea that persons who paid
their money in aid of the enterprise became seised of
any estate in the land. Their relation to the enterprise
was very much like the relation of stockholders in a
corporation to the property of the corporation."
Hence the widow's claim was dismissed.^

5 MaUory v. RusseU, 71 la. 63, 66, 32 N. W. 102. To the same effect,
are Butterfield v. Boardslcy, 28 Mich. 412 (proceeds of oil lands);
Hornor v. Meyers, 29 Ohio Weekly Law Bulletin 403 (petition for
partition of land refused); Dillworth v. Ackley, 1 Walk. 180 (Pa.)
(bank). An attachment of shares in a real estate association gave no
lien on the real estate. Pittsburg Wagon Works Estate, 204 Pa. St.
432, ."54 Atl. 311.

Joint stock company to deal in real estate. Land is personal prop-
erty b(!!()nging to the company collectively. Shareholder has only a
contingfmt interest in profits and his attacihing creditor can get no
more. Kramer v. Artliurs, 7 Pa. St. 105, 172.

Proceeds of mining lands declarc'd as a dividend was held income
as between life tenant and remainderman. Shareholder's interest in

80

Chap. II] PROPERTY RIGHTS [§21

It has seldom been of importance to determine the
exact natm^e of the interest of the cestui que trust in the

property said to be only a right to an accounting. Oliver's Estate, 136
Pa. St. 43, 20 Atl. 527.

"And while the association is not a creature of our statutes govern-
ing the formation and powers of corporations, but is organized and
exists at common law, there is no gi'ound for any distinction in the
apphcation of the principle announced in our decisions, that in what-
ever manner described or apportioned an addition to capital stock
generally is treated as capital belonging to the remainderman and not
to the life tenant. We are accordingly of opinion that there having
been no fimd which could be designated either as profits, undivided
earnings or accumulated surplus sufficient to meet the disbursement
necessary to discharge the arrearage, the issue of new shares must be
deemed an addition to the outstanding capital of the association."
Gardiner v. Gardiner, 212 Mass. 508, 99 N. E. 171. See Bisbee v. Mac-
Kay, 215 Mass. 21, 102 N. E. 327.

In deciding that shares in real estate trusts, all the property of which
and place of business and books where alone certificates could be trans-
ferred were within Massachusetts and the trustees of which lived there,
are subject to the Massachusetts inheritance tax when the deceased owner
was a resident of New York. Held : " It is not necessary to analyze with
greater nicety the precise character of the property interest of a share-
holder under each of the trusts. It is true of all of them that their
rights are equitable interests in tangible property within this Common-
wealth. While the legal title is in the trustees, their ownership is fidu-
ciary and the certificate holders are the ultimate proprietors of the
property, which is held and managed for their ultimate benefit and which
must be divided among them at the termination of the trust. Their
rights constitute not choses in action but a substantial property i-ight.
In this respect the case is indistinguishable in principle from share-
holders in a domestic corporation. Greves v. Shaw, 173 Mass. 205, 53
N. E. 372. The fact that the certificates themselves were not within
the Commonwealth is an immaterial circumstance." Peabody v.
Treasurer, 215 Mass. 129, 102 N. E. 435.

When a pm'chaser of shares in an association pledges them to secure
his pm'chase note and lets them stand on the books of the association
in the name of the pledgee, the purchaser is the equitable owner of the
shares. Lmnell v. Leon, 206 Mass. 71, 91 N. E. 895.

Issue as to validity of oil mining claim. Whether development
work done by a gi-antee of part of tract inured to benefit of that re-
tained. Held: "A location made by an association of persons being
but a single location and not eight separate locations is to be treated
as an entirety under one location for all purposes of marking bounda-
ries, doing assessment work, expenditure for patent, and discovery of
oil and that but a single discovery is aU that is required to support it."
Hence work done by successor inured to their benefit. Merced Oil
Co. V. Patterson, 162 Cal. 358, 122 Pac. 950.

But see a curious case where a joint stock company was formed to
lay out a town and sell lots. Held: A purchaser of shares from an

81

§ 21] ASSOCLITIOXS FOR PROFIT [Chap. II

trust res. The better opinion would seem to be that it
is a chose in action, a right enforceable in equity by the
beneficiary against the trustee. Courts have frequently
treated it, however, as an equitable estate especially
when the trust res is real estate.^ ^Modern tax laws are
responsible for many cases, the decision of which has
seemed to require consideration of abstruse problems
which bear Uttle resemblance to the constitutional
and statutory questions usuallj' involved in taxation.
There have been several of importance to our subject.
A certificate for shares in a real estate trust was
pledged in New Hampshire where the pledgee Uved.
The trustees hved and did business in ^Massachusetts.
The real estate was in ^Massachusetts. The terms of
the trust instnmient are not given and the court did
not consider the distinction between trust and part-
nership. The court said: "This propertj' was a valu-
able interest in real estate in Cambridge, the legal title
to which was held bj^ trustees." ''Although the tes-
tator held only an equitable interest in this real estate
instead of a legal interest we perceive no difference in
principle between the passing of this interest in suc-
cession and the passing of his interest under a mort-
gage held in like manner as security for a debt. We

original subscriber cannot on the ground of fraud on the original sub-
scriber claim to rescind and recover the original consideration. But a
certificate that a holder was entitled to one share in certain property
gives a claim in damages against the proprietors of the land who issued
the certificates if the title to part of the land failed. Wright v. Swayne,
.5 B. Mon. 441 (Ky.).

An organization to speculate in a town site, at first said to have
been incorporated, but later (p. 49) declared to be a joint stock com-
pany or partnership, executed deeds by its officers as authorized by an
irrevocable power of attorney from each stockholder and his wife.
Hence title of all partners pas-sed by these deeds. Batty v. Adams
County, 16 Neb. 44, 51, 20 N. W. 15. See Edwards v. Old Settlers
Ass'n, 16o H. W. 423, 42G (Tex.).

• Freedman's Co. v. Earle, 110 U. S. 710.

82

Chap. II] PROPERTY RIGHTS [§21

are of opinion that all this property is subject to the
tax upon succession prescribed by our law." ^

In another case it was held that whether the share-
holders were cestuis que trust or partners their rights
were equitable interests in tangible property within the
State. ''While the trustees hold the legal title, the cer-
tificate holders are the ultimate proprietors of the prop-
erty which is held and managed for their benefit and
which must be divided among them at the termination
of the trust. Their rights constitute not choses in
action but substantial property rights." ^

In another case it was decided that the words of a
statute, *'his estate found here" (which is to be admin-
istered according to Massachusetts law) includes not
only stock in Massachusetts corporations but ''shares
in the Western Real Estate Trust." "The trustees are
resident in this Commonwealth and their home business
office is here, where only can the certificates be trans-,
ferred upon surrender and new certificates issued.
The certificate-holder is at least the owner of an un-
divided equitable interest in the property held by the
trustees. There is on principle in this respect no
distinction between such certificate and a certificate
for shares of stock in a domestic corporation." ^

An action was brought to recover a legacy tax col-
lected by the United States under the War Tax of 1898
on certain shares in fifteen different real estate trusts.
The issue was whether the interests of the shareholders
in those trusts were real or personal. To the extent

7 Kinney v. Treasurer, 207 Mass. 368, 93 N. E. 586.

8 Peabody v. Treasurer, 215 Mass. 129, 102 N. E. 435.

9 Kennedy v. Hodges, 215 Mass. 112, 114, 102 N. E. 432. See
Graves v. Shaw, 173 Mass. 205, 53 N. E. 372, and Bellows Falls
Power Co. v. Commonwealth, 222 Mass. (Decided September 15,
1915.)

83

§ 21] ASSOCIATIONS FOR PROFIT [Chap. II

that they were personal property they were taxable;
if real estate they were not taxable. The plaintiff con-
tended that to the extent that the property owned by
the several trusts was real estate, the shares were equi-
table interests in real estate and the tax was illegally
assessed. The trust deeds were of the common type
but differed in many details, especially in the extent
of power vested in the shareholders to control or direct
by votes at meetings or by writings signed by certain
proportions of them, the business to be done by the
trustees, the amendment of the trust agreement, and
the termination of the trust. All the agreements except
one fixed a time when the trust should terminate, and
in all of them a prescribed number of shareholders could
terminate the trust by vote or writing at any time. The
provisions as to a sale of the property on termination
varied. In some the trustees had discretionary power
to sell at any time without the consent of the sharehold-
ers; in others the trustees had that right with the con-
sent of the shareholders; in others there was no provi-
sion for sale except on special authorization by the
shareholders. One of the trusts had cash on hand at
the time of the death of the shareholder, but was obli-
gated in a larger amount to buy certain land. On the
theory that equity will regard as done what ought to
be done, the court ruled that it should treat that cash
as real estate unless it had to be treated as personalty
under the stipulations of the trust agreement to be con-
sidered later. In another trust which had cash on hand,
there was a provision for a reserve fund but the court
said that the reserve fund should come out of the gross
income and would not effect the equitable conversion of
the cash on hand into real estate for the purchase of

84

Chap. II] PROPERTY RIGHTS [§21

which it had been accumulated. The court held that
the provision in most of the trust agreements for a final
termination and distribution, whether imperative or
discretionary, would not effect an equitable conversion
of the property at the time of the death of the share-
holder, because at that time the period for conversion
had not arrived. None of the trust agreements con-
tained an imperative direction to the trustees to sell the
trust property during the life of the trust and the court
therefore held that the real estate was not equitably
converted into personal property upon the conclusion
of the trust agreements or upon the death of the share-
holder. It was contended that the provision that the
shareholder should have no legal or equitable interest
in the trust property indicated that the right of the
shareholders was nothing but a chose in action, but the
coiu-t pointed out that it had been held in Massachusetts
that the shareholders' interest is not a mere chose in
action but an equitable interest in the corpus of the
trust, and the provision above referred to was not
sufficient to change this rule, because in each of the
trusts where it occurred the shareholders reserved either

(a) the power to control the trustees in the sale and
disposition of the property, to instruct, remove, re-
place trustees, amend and terminate the declaration
of trust, and to order a conveyance to themselves; or

(b) a right to authorize a sale or mortgage, to rebuild,
to remove trustees, and to terminate the trust when the
property shall be conveyed to the shareholders; or

(c) to authorize sales, in which case the trustees were
required to pay over the net proceeds, the right to
mortgage and rebuild, remove trustees, terminate the
trust, and having terminated it require a conveyance of

85

§ 21] ASSOCIATIONS FOR PROFIT [Chap. II

the property to the shareholders. ''Under such circum-
stances it cannot reasonably be said that they have no
right, title or interest in the property, and that their
interest as shareholders is a mere chose in action." In
a number of other trusts it was provided that the
shares should be personal property. It was contended
that this implied an imperative direction of the trus-
tees to convert the real estate. The court said: ''It is
plain that the mere declaration of the creator of the
trust that real estate, or equitable interest in real
estate, shall be considered as personalty, will not give
it that nature. You cannot impress upon real estate the
character of descendibility according to the rules appH-
cable to personal estate without directing the real estate
to be sold." In these particular trusts, taking all their
provisions into consideration, the court had no doubt
that the power of sale intended to be vested in the trus-
tees, if any, was discretionary. In two of the trusts the
trust was to continue for twenty years unless sooner
terminated, and the trustees were to improve, lease
or sell the real estate subject to the control or direction
of two-thirds of the shareholders, but with the power
to act according to their discretion unless they had re-
ceived instructions. The court said that this indicated
that so far as they had any powers vested in them they
were discretionary. "The provision for assignability
of shares without complying with the formalities
necessary for a conveyance of real estate does not make
them personal property. They represent equitable
interests in the corpus of the trust and their character is
determined by the nature of the corpus and if the corpus
is real estate it would seem that the transferability
would depend upon the law, governing the transfer of

86

Chap. II] PROPERTY RIGHTS [§21

interests in real estate in the place where the real estate
was situated in the absence of legislative authority
making special provision for their transfer." The court
therefore held that to the extent that the corpus of the
property was real estate or cash directed or agreed to
be invested therein, the tax was illegal.^"

If the dictum last quoted is sound, the transferabil-
ity of shares in associations or trusts owning real estate
becomes of little value. It is to be hoped that when the
question comes before the courts for direct decision it
will be held that the interest of the cestui que trust is a
chose in action and that the right of a shareholder in an
association or a trust owning real estate may be trans-
ferred without the formalities required of transfers of
legal interests in real estate. The question may well
be avoided, however, by proper provision in the deed
of trust for an imperative conversion of the real estate
into personality but to be postponed in the discretion
of the trustee.

The assignee of a shareholder will take his share
subject to the equity of his co-partners to have the
property applied in payment of firm debts. ^^ A pledgee
of a certificate for shares gets rights superior to a
creditor who attaches the undivided interest of the
shareholder in the property of the association.^^ A deed

10 Bartlett v. Gill, 221 Fed. 476 (D. C. — Mass.).

" Sale of share in a mine. Duryea v. Burt, 28 Cal. 569, 577,
586.

12 Citizens' Bank v. Bank of Commerce, 80 Kan. 205, 101 Pac.
1005.

A joint stock association was formed to develop timber lands. The
trustee held three-quarters of the shares. He mortgaged his interest
to a bank and then conveyed it to his brother. The documents sug-
gest that the parties were trying to convey real estate and not shares, but
the certificates were also dehvered to the mortgagee. Held: Though
this is a partnership the shareholder could mortgage his interest what-
ever that might be. The mortgage is valid and the conveyance to the

87

§ 22] ASSOCIATIONS FOR PROFIT [Chap. II

of land describing the grantee in its association name
vests title in those who are ascertained to have been
members of the association at the time, at least if the
firm name does not contain the name of any individual
partner. ^^ If the firm name does include the name of
any partner some courts would hold that title vests in
that partner in trust for the firm.^^ An association can
acquire by prescription a right of way over adjoining
land of one of its members. ^^

§ 22. Powers of Members of Associations for Profit

The officers of such associations may be held to have
implied power to bind it by their acts within the scope
of the purposes of the association.^ A curious exception

brother gave simply an equity of redemption. The rights of credi-
tors do not intervene here. Stringham v. Durkee, 8 Wis. 1, 123,
126.

13 Byam v. Bickford, 140 Mass. 31, 32, 2 N. E. 687. In Pomeroy v.
Latting, 2 Allen 221, a mortgage to "The Copake Iron Works" was
foreclosed by a writ of entry brought by the individuals who composed
a firm of that name.

Though a "deed to an unincorporated company and their successors
might be void" on ground of uncertainty a deed to trustees and their
successors in trust for the stockholders and their heirs in proportion to
the stock owned by each would be enforced. Natchez v. Minor, 17
Miss. 544.

" Beaman -y. WTiitney, 20 Me. 413, 420.

15 Bradley Fish Co. v. Dudley, 37 Conn. 137, 143.

1 Secretary may substitute new tenant under a lease. McNeal v.
Market Co., 43 Pa. Sup. Ct. 420, 427.

Treasurer may bind by promissory note. Here it purported in the
body of the note to be given by him in his official capacity. Kierstead
V. Bennett, 93 Me. 328, 332, 45 Atl. 42; Dow v. Moore, 47 N. H. 419,
424.

So of a note signed by agent, Kenyon v. Williams, 19 Ind. 44, 48;
Manning v. Gasiiarie, 27 Ind. 399; and a note of managers of a syndi-
cate to buy securities. Continental National Bank v. Heilman, 81
Fed. 36, 41; but not on an accommodation endorsement, Odiorne v.
Maxey, 13 Ma-ss. 178, 181 ; nor after dissolution, Lake v. Munford, 4
Sm. & M. (Miss.) 312, 319.

An officer was held properly removed by vot(" of the shareholders.
Inderwick v. Sndl, 2 Mac. & G. 216.

88

Chap. II] POWERS OF MEMBERS [§ 22

has grown up in the case of mining partnerships. The
managing agent has imphed power to bind the individ-
ual members of the firm only on contracts for supplies
or labor necessary to the working of the mine. This
exception has been explained on the ground that it is a
necessary consequence of the fact that the usual rule
of delectus personae does not apply to mining partner-
ships. In a case where the superintendent of a mining
partnership gave a note for the purchase of ditches for
use in the mining without express authority, the court,
while finding ratification from the fact that payments
were made on it with the knowledge and acquiescence
of all the partners, laid down the general rule as above
stated and said: "Mining partnerships, where there
are no partnership articles, are governed by the law of
ordinary partnerships, except so far as the general
usage of persons engaged in similar piu-suits or the es-
tablished practice of the particular company has estab-
lished a different rule. The only differences generally
existing . . . are such as legitimately flow from the fact
that in such partnerships there is no delectus personae." ^

2 There were numerous changes of the members but the incoming
members all knew of the debt. The creditor became a partner and
brought a biU for winding up and appUcation of assets to payment of
debts. It was held that the firm continued hable though some mem-
bers had sold then- shares and new members who bought with fuU
knowledge took subject to debts. Former partners who once were
hable are not necessary parties to this proceeding (p. 194). Jones v.
Clark, 42 Cal. 180, 191, 193.

Members of a mining partnership are liable for suppUes bought on
credit essential to the carrying on of the business though as between
themselves it was agreed that certain of the partners should not be
Hable for its debts. Hence attorneys who took shares in payment for
legal services were Hable. ManviUe v. Parks, 7 Col. 128, 135, 2 Pac.
212.

The power of one partner to bind another is adopted from the law
merchant and appHes to commercial partnership only. In other part-
nerships plaintiff must prove express authority or custom or usage of
that particular branch of business. The one is a question of law, the

89

§ 22] ASSOCIATIONS FOR PROFIT [Chap. II

It would seem, however, that this doctrine is probably
due to a misunderstanding of the early English cases
on mining partnerships, in which it was held that mem-
bers could bind their co-partners on simple contracts,
but not on negotiable instruments, on the theory that
such firms wfere not trading concerns. It is, of course,
well settled that members of firms that are not trading
or commercial partnerships have no implied power to
bind their co-partners by issuing negotiable commercial
paper,^

other of fact (p. 75). Hence a member of a mining partnership had
no power to bind the other on a contract to purchase lands. Judge v.
Braswell, 76 Ky. 67.

Members of a mining partnership are hable on labor claims not ex-
pressly authorized. Nolan v. Lovelock, 1 Mont. 224, 228.

Members of a mining partnership were held personally Hable for
money borrowed by the manager and used in the necessary prosecu-
tion of the business of operating the mine. There was evidence of
knowledge and acquiescence of defendants. Randall v. Meredith, 11
S. W. 170, 173 (Tex.).

^ Acting directors of a mining company had power to bind a share-
holder by contracts made in the usual way of conducting such a con-
cern, in the absence of knowledge of the plaintiff of a restriction to
cash dealings. Hawken v. Boiu-ne, 8 M. & W. 703, 710.

A shareholder in a mining partnership was held hable for goods sup-
pUed on order of directors for ordinary use in the mine. Abinger says
that though Dickinson v. Valpy held that a mining company is not
necessarily formed with the power to pledge the credit of individual
members by drawing biUs, it is for the jury to say whether directors
have power to bind members by dealing on credit (p. 465). Parke
says: " No point was made at trial tha: this was such a partnership as
could not deal on credit. If it had, the plaintiff could probably have
supphed evidence on that point" (p. 466). Tredwen v. Bourne, 6 M.
& W. 461.

A member of a mining partnership has not as such implied author-
ity to borrow money on the credit of the association and other members
are not liable for such debts. This is so even if he is general manager.
Rioketts v. Bennett, 4 M. G. & S. 686, 698.

In absence of evidence that it was necessary to the business of a
mining (company as of a trading company to bind members by draw-
ing bills of (!Xchango, a shareholder is not hable on one in the name of
the company drawn by order of directors. Dickinson v. Valpy, 10 B.
& C. 128, 136.

Gencinil agent, of mining conij)any has no implied authority to borrow
money of u bank to pay workmen who have attached materials even

90

Chap. II] POWERS OF MEMBERS [§ 22

There have been some decisions suggesting imphedly
the applicabihty of the doctrine of ultra vires as appUed
to corporations,'* but in most cases the usual agency
rules alone are involved. ^ The election of an officer must
be proved by the records, if available, not by parol.^

in such an emergency. Shareholders not hable. Hawtayne v. Bourne,
7 M. & W. 595, 599.

When the agent has express authority, it has been held that all
partners are bound. A mining partnership voted at a meeting to au-
thorize a contract with the plaintiff to erect a mill which contract was
later signed in the firm name by the secretary. There were no written
rules but the company usually did business this way. A purchaser of
a share previous to this contract who had never attended meetings or
taken an active part in the management of the partnership affairs or
held himself out to the world as a partner was held liable on this con-
tract. "It may be a matter of regret that our courts have gone to the
extent they have in excepting mining partnerships from the general
law of partnerships." Taylor v. Castle, 42 Cal. 367, 371.

When a member of a mining partnership is bound by the act of his
co-partner he is bound to the fuU extent of the liabiUty (p. 371). So
for suppUes necessary for the usual working of the mine (p. 372). A
mining partnership under the code arises only when the owners work
the mine, not when they lease it on shares to an outsider (p. 372).
Stuart V. Adams, 89 Cal. 367, 26 Pac. 970.

A member of a mining partnership was held liable for wages of an
employee hired by the manager regardless of hmitations in the articles.
(No distinction made between this and a general partnership.) Burgan
V. Lyell, 2 Mich. 102, 103.

^ Grantor of land to a joint stock association in excess of its statu-
tory power to hold cannot proceed to set it aside. That is a province
• of the State. Howell v. Earp, 21 Hun 393, 395.

Managing a hotel was held within the powers of a seaside land com-
pany because the land on which it stood was included in the .descrip-
tion in the original deed to the trustees of the association. Quimby v.
Tapley, 202 Mass. 601, 89 N. E. 167.

* Shareholders in an informal association to run stage hues were
sued in a winding up proceeding. Held : All stockholders are Hable to
creditors without notice for acts of directors even outside the objects
of the association. AU hable to contribution for acts within scope of
association. Shareholders who had knowledge of acts of directors and
ratified them by silent acquiescence are liable even to creditors who
had notice. Rianhard v. Hovey, 13 Ohio 300, 302.

^ Saltsman v. Shults, 14 Hun 256.

The acts of an unincorporated association may be proved by parol,
though they kept a record. Wilhs v. Chapman, 68 Vt. 459, 467, 35
Atl. 459; Newell v. Borden, 128 Mass. 31.

The assessment book of a mining association which was accessible
to members and of the contents of which a member had knowledge and

91

§ 22] ASSOCIATIONS FOR PROFIT [Chap. II

It has been held that individual members of such an
association have not implied power to bind it by their
acts, like ordinary partners.^ The courts will enforce
reasonable regulations of associations for profit ^ but

the correctness of which had never been disputed was admissible against
him as to the extent of his ownership. Abernathie v. Virginia Co., 16
Nev. 260, 268.

^ Spotswood V. Morris, 12 Idaho 360, 384, 85 Pac. 1094, 1102;
OUver's Estate, 136 Pa. St. 43, 59, 20 Atl. 527; WiUis v. Greiner, 26 S.
W. 858 (Tex. Civ. App.).

In the case of mining partnerships it has been held that a member
has no imphed power to bind the other members on any contract. The
reason assigned is that the rule of delectus personae does not apply to
association with transferable shares and therefore the mutual confi-
dence which should accompany the power to impose unUmited ha-
bihty on fellow members is lacking. Skillman v. Lachman, 23 Cal.
198, 206.

The owners of the mine as tenants in common in the working of it
were partners. "As mining partnerships are not usually founded on
the delectus personae, the powers of the individual members of the firm
are much more limited than are the powers of the individual members of
a purely commercial or trading partnership." Those holding the major-
ity interest control its pohcy, but their conduct will be most jealously
scrutinized. Dougherty v. Creary, 30 Cal. 290, 300.

Members of an irrigation association who own a ditch and convey
water and sell it to miners for mining purposes are not like an ordinary
commercial partnership. A member has no implied authority to bind
the members by his contracts. A managing agent has no authority
but that conferred on him either expressly or by necessary implica-
tion from his acts recognized by the company with full knowledge of
the acts at the time of recognition (p. 370). This was on a note given
for lumber to repair the ditch. The members so far as informed were
told that the lumber was to be paid for out of proceeds of sale of water
(p. 371). McConneU v. Denver, 35 Cal. 365.

When members of a mining partnership disagree the majority in
interest control but arc said to be liable to the minority for "culpable
negligence or breach of duty." Bartlett v. Boyles, 66 \V. Va. 327, 330,
66 S. E. 474.

There is a curious old case of an association to run a steamboat
which the court said was not a partnership, in which it was also said:
"The general f)rinciple of law is that in such private associations the
majority cannot bind tiio minority unless it be by special agreement."
A stipulation for majority vote was held to apply only to the details
of iiianagcitient and not to fundamentals. Livingston v. Lynch, 4
.John.s. Ch. 573.

•* WIktc by-laws provided that tellers be appointed by stockholders
anfl they wen; ap})()iiit(!d l)y the chairman against the protest of the
Hliarclioldens an elecrtion so held was void. Tidewater Pipe Co. v.
Xattorfield, 12 Weekly Note Cas. 457.

92

Chap. II] POWERS OF MEMBERS [§22

it has been held that the members are not bound by
unreasonable ones.^ The majority have no power to
violate the articles of agreement without unanimous
consent.^'' A member of an association buying up
notes of the association in fact pays his own obligation.
Equity, however, will keep them alive for purposes of
accounting and contribution, but will not let him

^ Action by a shareholder in a partnership association for labor per-
formed for it. Its by-laws provided that all members should be bound
by its rules and regulations from time to time adopted. It passed a
resolution that its funds should be appUed to developing the business
instead of paying the employees. Held: This does not prevent plain-
tiff from suing for his labor though it is conceded that stockholders
would be bound by regulations from time to time adopted if they are
reasonable. McCarthy v. Caledonia Coal Co., 164 Mich. 692, 130
N. W. 207.

But where a clause in the deed of trust of an EngUsh unincorporated
joint stock company provided that a special meeting could remove an
officer "for negligence, misconduct or any other reasonable cause,"
it was held not to mean such a cause as a court would find bona fide
and founded on sufficient evidence, but such cause as the shareholders
duly assembled deem reasonable. Inderwick v. Snell, 2 Mac. & G.
216.

1" Brewing company. Held: One person could not be appointed
at a general quarterly meeting in place of the two originally appointed
under the deed unless with the consent of all subscribers. Davies v.
Hawkins, 3 Maule & Selwyn 488.

A company was formed to build a corn exchange. Deed of settle-
ment limited the amount of each shareholder's subscription and re-
stricted the authority of the directors to borrow. The directors bor-
rowed and incurred debts. Held: Could not charge shareholders for
either beyond the amount of their subscriptions. Worcester Corn
Exchange Company's Case, 3 De G. M. & G. 180.

A partnership association was formed to deal in lands in Wisconsin.
There was a bill by a shareholder alleging fraud of the officers and mem-
bers in getting title in severalty to part of the land through taking up
mortgages. Held: Plaintiff cannot contend that the mortgages and
assignments were invalid because authorized at meetings held outside
the State because he voted by proxy at them. The managers had au-
thority to mortgage. Their meetings are presumed to be regular.
Stradley v. Cargill Co., 135 Mich. 367, 375, 97 N. W. 775.

The rights of mining partners so nearly partake of the rights of co-
tenants that the majority interest in case of disagreement have no
right to sell and convey the interest of the minority in a mining lease
(p. 269). All the partners are liable on a contract made by the majority
not in neghgence or bad faith (p. 270). Edinger v. Southern Oil Co.,
69 W. Va. 34, 71 S. E. 266.

93

§ 23] ASSOCIATIONS FOR PROFIT [Chap. II

make a profit out of them; ^^ nor can a member make a
secret profit out of a competing business. ^^ It has been
held that an officer, because he is a partner, is not
entitled to pay for his services in the absence of
agreement. ^^

§ 23. Pleading of Informal Associations for Profit

In litigation by or against the association all members
should be joined as parties ^ unless the non-joinder is

" Coleman v. Coleman, 78 Ind. 344, 346.

Members cannot make a secret profit at the expense of the associa-
tion. McDowell V. Joice, 149 111. 124, 36 N. E. 1012.

Promoters owe a fiduciary obligation to each other (dictum). Cortes
Co. V. Tannhauser, 45 Fed. 730.

A promoter was held liable to members of his syndicate for a secret
profit both on grounds of agency and as a partner. Baltimore Trust
Co. V. Hambleton, 84 Md. 456, 36 Atl. 597.

One of a group engaged in a real estate deal was held hable for a
secret profit. The court said it was not necessary to decide whether
it was a partnership or not because there is the same fiduciary obhga-
tion between parties engaged in a common enterprise whether partners
or not. Bestor v. Barker, 106 Ala. 240, 17 So. 389.

Plaintiff sued as subscriber to an agreement to buy land. In fact
the land belonged to the defendants who also subscribed but did not
disclose their interest. Held: Circulating such a paper was a false
representation. Defendants also hable for secret profit as partners.
Getty V. Devlin, 54 N. Y. 403, 412.

^ An association was formed to send a party of members to Cali-
fornia for gold. The association provided the outfit for eight members,
who were to have one-half the profits of their work, the rest to go to
the association. On reaching California they broke up and worked
separately and defendant struck gold. Held : He is boimd to share this
with the other members of the association. Though a partnership
may be dissolved by act of a member this should be communicated to
the others. It does not api)ear that the eight did more than decide to
work sei)arately. They W(!re in the position of employees and bound
by their contract. Eagle v. Bucher, 6 Ohio St. 295, 301.

But this does not ajjply after the original enterprise has been prop-
erly abandoned. Mining venture. Waring v. Cram, 1 Pars. Sel. Eq.
C[i.s. 510.

" Since a joint stock association is only a i)ar(norship a shareholder
who HCTVcs us secretary and treasurer without stii)ulating as to his pay
cannot recover for the services. Re Fry, 4 Phila. 129, 133.

' Metal Stamping Co. v. Crandall, Fed. Cas. No. 9493 C (bill of
revivor by an association which liad acquired title to certain patents

94

Chap. II] PLEADING OF INFORMAL ASSOCIATIONS [§ 23

not pleaded in abatement.^ This rule, however, is of
course modified by the general rule of equity as to suits
in which the parties on one side or the other are very
numerous, viz., that it is sufficient if enough are joined
to represent fairly all others of like interest.^ When
members of the association are sued, the plaintiff must
prove the joint liability of all defendants or dismiss as to
those not liable.^ The association cannot be made a
party in its association name ^ unless there is express

after death of inventor in whose name suit was originally brought.
Should have proceeded by supplemental bill in names of all partners) ;
Williams v. Michigan Bank, 7 Wend. 539; Montgomery v. Knox, 20
Fla. 372, 380 (bill for receiver by members of mutual fire insurance
association).

2 McCreary v. Chandler, 58 Me. 537.

If the defendant pleads non-joinder, he must give the names
of the other partners. Kingsland v. Braisted, 2 Lans. 17, 20
(N. Y.).

* A few of the shareholders of an unincorporated association may
sue on a claim of the association without joining all. To complete ex-
ecution of a lease, Taylor v. Salmon, 4 M. & C. 134; to recover sub-
scriptions, Walworth v. Holt, 4 M. & C. 619; to rescind a contract,
Small V. Atwood, 1 Younge 407; to recover misappropriated funds,
Chancey v. May, Finch Ch. Cas. 592.

Cockburn v. Thompson, 16 Ves. 321; Von Schmidt v. Huntington,
1 Cal. 55; Martin v. Dryden, 6 111. 187, 209 (bill to establish a trust in
land bought for a land syndicate); Mann v. Butler, 2 Barb. Ch. 362,
368 (bill for winding up a land trust).

A bill in equity by a secretary of an unincorporated association on
behalf of himself and all other members was dismissed on the merits.
Another bill against the same defendants was filed in the name of the
association on the same facts. Held : Res judicala because of former
suit. The secretary was authorized to sue. American, etc. Ass'n v.
Importers' Ass'n, 114 111. App. 136, 140.

A bill to wind up a mining partnership alleged that members were
numerous and some could not be ascertained. A few were allowed to
represent all and the mine was sold by a receiver. On a bill later to
quiet title held that the former decree could not affect the title of ab-
sent members of the mining partnership for they held that title as
tenants in common. Santa Clara Mining Ass'n v. Quicksilver Mining
Co., 17 Fed. 657, 659 (C. C. — Cal.).

* Powell Co. V. Finn, 198 111. 567, 569, 64 N. E. 1036 (improvement
association).

5 Mutual V. Reser, 43 Ind. App. 634, 638, 88 N. E. 349.
Even where it has appeared and answered in the name in which it
was sued. Action for personal injuries against bondholders who were

95

§ 23] ASSOCIATIONS FOR PROFIT [Chap. II

statutory authority for such procedure.^ An agreement
to allow an agent of the association to sue in his own.
name on contracts made with the association will not
be enforced J A statute providing for ser\'ice of process

reorganizing and operating through an agent. Light Co. v. Muncey,
33 Tex. Civ. App. 416, 419, 76 S. W. 931.

In some cases it has been held proper practice to name the associa-
tion as a party with certain individual members. Here there was no
plea in abatement, however. McXeal v. Market Co., 43 Pa. Sup. Ct.
420, 427. So bv statute. Inglis v. MUlersburg Driving Ass'n, 136
N. W. 443, 445 (Mich.).

« Hewitt V. Storey, 39 Fed. 719, 721 (C. C. — Cal.) (ditch com-
pany); but the name actually used must be correctly stated, King v.
Randlett, 33 Cal. 318, 322.

Camden, etc. R. Co. v. Pennsylvania Guarantors, 59 X. J. L. 328,
35 Atl. 796; Weaver v. Trustees, etc. Canal, 28 Ind. 112 (action in
name of trustees authorized by statute).

It has been held that action may be brought in the name of the
trustee in accordance with the articles of association in the absence of
statute. Laughhn v. Greene, 14 la. 92, 94; and likewise against the
trustees as defendants. Mutual v. Reser, 43 Ind. App. 634, 638, 88
N. E. 349.

It is constitutional for the legislature to authorize unincorporated
associations to sue and be sued by their association name. It affects
remedies and not fundamental rights. Warner v. Beers, 23 Wend.
102, 151, 152.

Action by the Akron Brick Association against one who had agreed
to pay for brick it was furnishing to sub-contractors for defendant.
Defendant set up that plaintiff was an illegal association to suppress
competition and enhance prices. Held : By statute a partnership may
sue in its firm name. A partnership can be formed only for a lawful
purpose. Hence the association not being lawful does not come within
the terms of the statute and cannot sue in its o^m name. This does
not deny the right of the members of the association to enforce contracts
in their own names which do not depend on the illegal arrangement.
Jackson v. Akron Brick Ass'n, 53 Ohio St. 303, 41 N. E. 257, 57 Am.
St. Rep. 637, 35 L. R. A. 287.

An individual doing business under a company name could not
sue in that name under a statute giving that right to associations
(semble). Meyer v. Furniture, etc. Co., 76 Neb. 405, 408, 107 N. W.
767.

A special statute authorizing the president of an insolvent unin-
corporated bank to sue in his own name the debtors to the bank is
constitutional. It is a way of allowing a partnership to sue. Lewis v.
McElwain, 16 Ohio St. 347.

' The rules of a mutual unincoiporated insurance association pro-
vided that the manager niiglit, sue in his own name for the (contribu-
tions due from the inernbcrs. This was such an action. Held: An
agreement to authorize an agent to sue on behalf of an unincorporated

9G

Chap. II] PLEADING OF INFORMAL ASSOCIATIONS [§ 23

on an agent of unincorporated associations is constitu-
tional.^ By contracting with an association in its com-
pany name a party is not estopped to deny it is a cor-
poration.^ The members can sue for libel as individuals
having a common interest in the business affected.^**
Adjustment of accounts between a ship master and an
association of which he was agent was held not within
the jurisdiction of admiralty/^ but in one case a court
of admiralty enforced a trust in favor of such an asso-
ciation against an individual creditor of the trustee. ^^
Courts of equity have jurisdiction to appoint a receiver
of an association as prayed for in a bill containing
allegations of waste. ^^

company or partnership is one that the law does not recognize. The
defendant's promise was not an agreement with the manager, but with
him as agent of the association. Hence demurrer sustained. Evans
V. Hooper, L. R. 1 Q. B. D. 45, 48.

8 Appeal of Baylor, 93 S. C. 414, 77 S. E. 59.

In Massachusetts by statute foreign express companies are obliged
to designate an agent for service of process. R. L. Ch. 70, § 3. It is
an interesting problem how execution could be levied on a shareholder
in an action so brought where the company is, as is usual, sued in the
association name.

An action against an unincorporated association selling religious
books was held properly brought by service on the agent in charge of
its affairs in the absence of statutory authority. Slaughter v. American
Baptist Missionary Society, 150 S. W. 224, 227.

9 Re Mendenliall, Fed. Cas. No. 9425; Williams v. Michigan Bank,
7 Wend. 539.

i» Bar Co. v. Zimmerman, 110 Md. 313, 321, 73 Atl. 19 (attempted
incorporation).

11 Grant v. PoUion, 20 How. 162.

1^ Members of a joint stock company for mining and trading in
California bought a vessel and stores and took title in names of repre-
sentatives whose creditors have attached it. Libel in admiralty by
the members of the association for title and possession to the vessel
and stores. Decree for hbellants. Attaching creditor had notice of
the trust when debt contracted. No allowance for services of the
trustee because of misconduct. The Taranto, Fed. Cas. 13751 (D. C.
— Mass.).

1' Facts held not to justify allegation of plaintiff in an application
for a temporary receiver of a joint stock association on a stockholder's
bill alleging waste. Dudley v. Piatt, 127 N. Y. S. 154, 70 Misc.
322.

97

§ 24] ASSOCIATIONS FOR PROFIT [Chap. II

§ 24. Rights and Liabilities of Shareholders

The most important practical question in the law of
partnership is the individual liability of partners for
the debts of the concern. In accordance with the rule
applied to ordinary partnerships, when none of the
methods discussed hereafter ^ by which shareholders in
associations have endeavored to avoid this liability are
adopted, it is held that the shareholder or member is
personally liable for the debts of the association ^ and

1 See §§ 29-31 inclusive.

2 Greenup v. Barbee's Exec, 1 Bibb. 320 (Ky.) (dictum); Jenne v.
Matlack, 19 Ky. Law Rep. 503, 41 S. W. 11 (industrial exposition);
Holt V. Blake, 47 IMe. 62 (newspaper); Frost v. Walker, 60 Me. 468,
470 (express company); Bain v. Loan Ass'n, 112 N. C. 248, 17 S. E.
154 (loan association); Parrott v. Eyre, 10 Bing. 283 (trustees of
turnpike borrowed money not in accordance with the statute and so
were not reheved of personal hability); Keasley v. Codd, 2 C. & P.
408 (member of London Carrier Co. hable for goods sold and delivered) ;
Mandsley v. LeBlanc, 2 C. & P. 409 (director of Steam Washing Co.
liable on contract made at a meeting he did not attend); Bennett v.
Lathrop, 71 Conn. 613, 616, 42 Atl. 634 (member of athletic club
formed to run a polo team for pleasure and profit was liable); Wads-
worth, t^. Duncan, 164 111. 360, 45 N. E. 132 (shareholder in bank liable
to depositor); Manning v. Gasharie, 27 Ind. 399 (member of coopera-
tive store liable on note signed by its agent); LjTich v. Postlethwaite,
7 Mart. (La.) 69, 208, 213 (stockholder in steamboat company liable
on contract to build boat); English v. Wall, 12 Rob. (La.) 132, 135
(member of banking association liable on bills of exchange and cer-
tificates of deposit); Dow v. Moore, 47 N. H. 419, 424 (members of
cooperative store liable on treasurer's notes); Camden R. Co. v. Penn-
sylvania Guarantors, 59 N. J. L. 328, 35 AtL 796 (Members of insur-
ance association hable on policy); Wells v. Gates, 18 Barb. (N. Y.)
5.'j4, 556 (member of association formed to publish scientific journal
wa« liable); Nolan v. McNamee, 82 Wash. 585, 144 Pac. 904.

Plaintiff contracted to furnish news to the lialtimore Newspaper
A8.sociation. By tiie terms of the (contract the members were not only
entitled to uw; the news themselves but might sell it to outsiders. Held:
MeinbcrH liabl<! as partners. United Press v. Al;ell Co., 84 N. Y. S.
42.5, 87 App. Div. 6.30.

D(!clarHtion in contract, against members of an association is not
deriiurrabl(! if it allt'g(!.s they arc organized for j)ecuniary profit. Ranken
V. rrohcy, 1 15 N. Y. S. 832, 131 Ai)p. 13iv. 328.

, MciiibcrH of a l)ri(lg(; l)uil(liiig a.ssociation formed in contemplation
of incorjioratiou and which later is incorporated are personally liable

U8

Chap. II] RIGHTS AND LIABILITIES [§ 24

for damages caused by its negligence.^ A member is
liable for torts of the association ■* or of another mem-
ber while engaged in the business of the association.^

as partners for debts incurred before incorporation. Broyles v, McCoy,
37 Tenn. 602.

The liability of members of a joint stock association organized in
Canada is to be determined by the law of Canada. At common law
it is settled that they are liable in solido for the debts of the associa-
tion. Cutler V. Thomas, 25 Vt. 73, 77.

3 Inglis V. Millersburg Driving Ass'n, 169 Mich. 311, 136 N. W.
443 (negligently burning brush so that it fired adjoining property.
Race track association).

* Farmers Co. v. Jones, 147 S. W. 668 (Tex. Civ. App.) (personal
injuries).

A syndicate promoted a corporation and was sued by the corpora-
tion for secret profits made by the managers of the syndicate. Held:
All the partners are liable for the acts of misfeasance of the managing
partners. Not a personal action that dies with the partner. His
estate can be held in equity. New Sombrero Co. v. Erlanger, L. R.
5 Ch. D. 73, 117.

A sale by a trustee of the trust estate to an association of which he
is a member is voidable. "All his associates are chargeable with the
same considerations which would bear upon him were he solely inter-
ested as purchaser." Robbins v. Butler, 24 111. 387, 432.

^ Licensed pilots formed an association. Pilots took turns in board-
ing vessels, fees were paid into a common fund. Association hired
offices and boats and paid expenses out of funds including operation
of pilot boats. Plaintiff sued members of association for neghgence of
one of the pilots. Held: Members were partners and so liable (p. 230).
The relation between plaintiff and pilot was not contractual but com-
pulsory. "Whether the respondents are liable as partners or not,
there would seem to be no reason why they should not be held jointly
Mable for the faithful performance of their duties discharged under the
circumstances set forth in the hbel, where it appears that although not
incorporated and therefore not liable as an association, they in effect
act by joint cooperation in the discharge of their duties" (p. 233).
Donald v. Guy, 127 Fed. 228 (D. C. — Va.).

Suit in admiralty by members of a Tug Line in contract against
owners of a schooner for salvage services. She was being towed by a
tug of the association and by its negligence stranded and others of the
association went to its assistance. This was an association Uke the
pilot association by owners of tugs. Profits distributed pro rata agreed
valuation of tugs. Held : Partners. The mutual agency has been dele-
gated to a general manager. Liable for losses. Duty of association to
do what these tugs did to reheve schooner stranded by negligence of
a member (p. 955). Hence no imphed contract to pay for it. Inde-
pendently of partnership the service was not rendered with the idea
of compensation because of joint relation of boats (p. 956). Fleming
V. Lay, 109 Fed. 952 (C. C. A. — Ohio).

99

§ 24] ASSOCIATIONS FOR PROFIT [Chap. II

Though a national bank may acquire title to shares in
a corporation which have been previous^ pledged to
it as security for a debt, it is beyond its power to take
title under similar circumstances to shares in an asso-
ciation for profit because of the liabihty incurred by
members of a partnership. A partnership was formed
to purchase, improve, di^dde into lots and sell a lease-
hold. There were forty shares in the firm, represented
by transferable certificates. A national bank took
nine of these as security for a debt and afterwards be-
came owner of them in satisfaction of the debt, subject
to the question whether the transfer was within the
powers of a national bank. In a bill for dissolution of
the partnersliip it appeared that contribution was
necessary to the debts of the firm and that some part-
ners were insolvent. The Supreme Court of Ohio held
(69 Oh. St. 160) that the bank was not a partner and
therefore not liable for the full amount of the debts of
the firm, but that it became a part owner of the prop-
erty and, as it joined in the management of the same,
was hable for nine-fortieths of the expenses which con-
stituted the debts of the fiiTQ. In the opinion of the
Supreme Court of the United States, Holmes, J., said:
"As the Supreme Court of Ohio assumes such partner-
ships and certificates to be vaUd, we assume them to be
(citing cases). We maj^ assume further, in accordance
with a favorite speculation of these days, that pliilo-
sophically a partnership and a corporation illustrate a
single principle, and even that the certificate of a share
in one represents property in very nearly the same sense
as does a share in the other. In either case the members
could divide the assets after paying the debts. But from
the point of view of the law, there is a very important

100

Chap. II] RIGHTS AND LIABILITIES [§ 24

difference. The corporation is legally distinct from its
members, and its debts are not their debts. Therefore,
when a paid-up share in a corporation is taken, no lia-
bility is assumed, apart from statute, but simply a right
equal in value to a corresponding share in the assets and
good- will of the concern after the debts are paid. If
this right is worth something it is a proper security, and
if it is worth nothing no harm is done. It is true that a
statute may add a liability, but when, as usual, this is
limited to the par value of the stock, it has not been
considered to affect the nature of the share so funda-
mentally as to prevent a national bank from taking it
in pledge, with qualifications, as it might take land or
bonds.

''But to take a share by transfer on the books means
to become a member of the concern. The person who
appears on the books of the corporation as the stock-
holder is the stockholder as between him and the cor-
poration and his rights with regard to the corporate
property are incident to his position as such. (Citing
cases.) This does not matter or matters less, in the case
of a corporation for the reasons which we have stated.
But when a similar transfer is made of a share in a part-
nership it means that the transferer at once becomes a
member of the firm and goes into the business with an
unlimited personal liability, in short, does precisely
what a national bank has no authority to do. This the
Supreme Court of Ohio rightly held beyond the powers
of the bank. (Citing cases.) It is true that it has been
held that a pledgee may escape liability if it appears on
the certificate and books that he is only a pledgee.
(Citing cases.) No doubt the security might be real-
ized without the pledgee ever becoming a member of

101

§ 24] ASSOCIATIONS FOR PROFIT [Chap. II

the firm. It is not necessary in this case to say that
shares Uke the present could not be accepted as secur-
ity in any form by a national bank. But such a bank
cannot accept an absolute transfer of them to itself.
It recently has been decided that a national bank can-
not take stock in a new speculative corporation with the
common double liability in satisfaction of debt. First
National Bank of Ottawa v. Converse, 200 U. S. 425.
A fortiori, it cannot take shares in a partnership to the
same end.

"We are of opinion that with the liability as partners
all liability falls. The transfer of the shares to the
bank was not a direct transfer of a legal interest in the
leasehold, which was in the hands of trustees. It was
simply a transfer of a right to have the property ac-
counted for and to receive a share of any balance left
after paying debts and the acquisition of this right was
incident solely to membership in the firm. If this
membership failed the incidental rights failed with it,
and with the rights the liabilities also disappeared.
Becoming a member of the firm was a condition of both
consequences. As the bank was not estopped to deny
that it was a partner, it was not estopped to deny
all liability for partnership debts." ^

A judgment against one member merges the cause of
action against all other members and they cannot there-
after be sued.'' One member cannot sue another mem-
ber on a firm transaction at law,^ unless there has been

» Merchants National Bank v. Wehrmann, 202 U. S. 295, 300, 50
L. (;d. 1030, 20 8. Ct. 013 (three judges dissented).

■> United Press v. Abell Co., 84 N. Y. S. 425, 87 App. Div. 630.

' A in(!inb(!r of a joint stock coinj)any cannot sue in assumpsit at
law anothcir ineinlxT wlio has takcui possession of tiie property of tlio
a«sociatiori for its use. Whitcihouse v. Sprague, 7 Atl. 17 (Me.).

Action at law on a subscription agreement to form a joint stock

102

Chap. II] RIGHTS AND LIABILITIES [§ 24

an accounting fixing the amount due ^ or the transac-
tion has otherwise been severed from the mutual obli-

company and buy a ship. Held: The plaintiffs as members could not
sue the defendants as members at law. The only remedy is in equity
for an account as between partners. MjTick v. Dame, 9 Cush. 248, 254.

A fruit canning association is described as a partnership, but lia-
bility of members is put upon agency by direct authority. Action at
law between members impossible. Hence member who took over debts
and sued another member at law could not recover. Laney v. Fickel,
83 Mo. App. 60, 63.

Joint stock association to operate a water power. Held: Partners.
A note to a shareholder endorsed by him to one not a shareholder can
be sued on at law (p. 676). A shareholder who has sold out is still
liable if the plaintiff at the time the debt was contracted did not know
of his retirement but acted in reUance on his membership (p. 678).
"A partnership or joint stock company is just as distinct and palpable
an entity in the idea of the law as distinguished from the individuals
composing it as is a corporation; and can contract as an individualized
and unified party with an individual person who is a member thereof
as effectually as a corporation can contract with one of the stock-
holders." The only difference is a technical one of procedure (p. 676).
Walker v. Wait, 50 Vt. 668.

Conway v. Zendler, 154 Wis. 479, 143 N. W. 162. An assignee of a
member cannot sue. BuUard v. Kinney, 10 Cal. 60, 63 (claim for
goods sold).

A stockholder in an express company sued for loss of a package.
Under New York statute he sued president. Held: Statute permits
a member to sue. Since statute limits remedy to funds of the asso-
ciation it eUminates the objection of partnership that plaintiff would
be suing himself. The president for purpose of action is made a cor-
poration sole. It is plain that joint stock associations organized under
the statute have some of the powers and privileges of corporations not
possessed by individuals or partnerships. Westcott v. Fargo, 61 N. Y.
542, 550, 19 Am. Rep. 300; Ace. Sander v. Edling, 13 Daly (N. Y.) 238;
Fritz V. Muck, 62 How. Pr. (N. Y.) 69; Saltsman v. Schultz, 14 Hun 256.

Action against members of an association (not a joint stock com-
pany) after judgment against the association under the statute. Held:
Defendant may plead non-joinder of other partners but must give their
names. The fact that the plaintiff is a firm some of whose members
are also members of the defendant association is no bar to an action
at law since the distinction between actions at law and suits in equity
is abolished. Kingsland v. Braisted, 2 Lans. 17, 20 (N. Y.).

One member of a mining partnership cannot sue another at law until
there has been an accounting. On the death of the plaintiff's testator
the firm was not dissolved and his estate succeeded to his interest.
Bochme v. Fitzgerald, 43 Mont. 226, 115 Pac. 413.

Semble: One who lends money to an association and later becomes
a member may bring an action at law on it though a partner. Garrand
V. Hardey, 5 M. & G. 251, 477, 484.

^ Refund of contributions to an association formed to hire sub-

103

§ 24] ASSOCIATIONS FOR PROFIT [Chap. II

gations of the members.^" Within this rule he is Uable
at law for his agreed contribution to the capital. ^^
"V\'Tiether or not a subscriber is liable before the entire
capital is subscribed, depends on the interpretation of
the articles of agreement. ^^ If a corporation is organ-

stitutes for an army draft. Koehler v. Brown, 2 Daly (N. Y.)
78.

It is not clear whether the following case belongs in this note or as
a contra case urider the preceding note. The point was not discussed
in the opinion. Boyd v. Merriell, 52 111. 151, 153.

Deceased subscribed with others an agreement to organize a joint
stock company. After his death the survivors conveyed to the plain-
tiff aU the assets of the company including the accounts due. Held:
This was a partnership and dissolved by death. There are no creditors.
The transfer of accounts receivable could not be assigned so as to enable
the assignee to sue without an accounting. Villas v. Farwell, 9 Wis.
460, 462.

^^ Written contract to pay debts for keep of a horse sold defendant
by association. Simpson v. Ritchie, 110 Me. 299, 86 Atl. 124.

" Member of stage line company hable to its agent on his subscrip-
tion. Brj'^ant v. Goodnow, 5 Pick. 228.

Contra. An unincorporated mining company cannot sue in the
name of its trustee a member for a balance of his subscription, but
must proceed in equity for a partnership account. Niven v. Spicker-
man, 12 Johns. 401.

An agreement to organize a joint stock company in substance bind-
ing the signers to pay the sum set after their names is in effect a promise
to the other signers to make the payment and is binding. False rep-
resentations by one of the signers to the defendant are not binding on
the others and do not avoid his subscription. Kimmins v. Wilson, 8
W. Va. 584, 590.

Subscriptions to shares in a joint stock company were expressly
made to trustees for the association. Held: They were partners. Or-
dinarily the contract of subscriptions is made with all the members
and the action would have to be by all of them, but where expressly
payable to trustee they are the ones to sue. Cross v. Jackson, 5 Hill
478, 480.

'2 A scheme for sale of shares in a real estate speculation seems to
have contemplated an association because the certificate provided for
majority control of sales. In an action on a subscription, Held: The
subscriber was liable whether or not all the shares were subscribed
(no discu.ssion of associations). Sandford v. Halsey, 2 Den. 235,
2.50. See Sickclsteel v. Edmonds, 158 Wis. 122, 136, 147 N. W.
1024.

A landowner projected a joint, stock association to own and sell the
land. Held: On interpretation of tlic articles of agreement no sub-
Bcribcr was to be liable till the entire capital had been subscribed.
Sanford v. Handy, 25 Wend. 475, 479.

104

Chap. II] RIGHTS AND LIABILITIES [§ 24

ized instead of an association, one who subscribed to an
association is generally held not liable to the corpora-
tion on his subscription.^^ When shares are forfeited
by the association for non-payment of subscriptions in
accordance with the articles of agreement, the sub-
scriber is usually allowed by the courts to redeem, if no
rights of others have intervened.^* If the articles im-
pose no penalty for failure to pay assessments, there
is no authority for a forfeiture of shares.^'' A member
may, of course, bring a bill in equity for contribution
to its debts,^^ but not on a debt incurred in violation of

13 Knottesville Co. v. Mattingly, 18 Ky. Law Rep. 246, 35 S. W.
1114; Machias Co. v. Coyle, 3.5 Me. 405.

Because it is not assignable to the corporation and he does not be-
come a member of the corporation without his assent. Wallingford
Co. V. Fox, 12 Vt. 304, 309.

A joint stock company was formed by subscriptions payable to
trustees. Incorporation was contemplated and subsequently carried
out. The corporation as successor to trustees sued on these subscrip-
tion promises. Held: Though the subscribers were partners and the
trustee was a co-partner an action at law can be brought on a partner's
promise to contribute to the original capital of the fii-m. (Only one
decision by Chancellor Kent, Livingston v. Ljmch, held contra.) Town-
send V. Goewey, 19 Wend. 424, 427, 429.

" Articles of agreement of an unincorporated association provided
that on failm-e to pay assessments shares should be forfeited, but no
method of forfeiture specified. Held: No rights having intervened,
after such a forfeiture the shareholder will be allowed in equity to re-
deem. Suggested that bill to foreclose was the only effective method
under these articles. Walker v. Ogden, Fed. Cas. 17081 (C. C. —
lU.).

A shareholder in a voluntary association under a deed of trust to
work a mine failed to pay assessments and his shares were forfeited
under the provision in the deed of trust. Held: "Equity will not re-
lieve against a forfeiture of stock where the shareholder has acquiesced
in the same until a change of circumstances or conditions has arisen."
Also held partnership. Joseph v. Davenport, 116 la. 268, 274, 89 N. W.
1081.

15 Stringham v. Durkee, 8 Wis. 1, 130.

18 Henry v. Jackson, 37 Vt. 431 (cooperative store); see § 28, note 8,
and § 31, note 11.

Bill by one shareholder in an association for an account and pay-
ment of subscriptions by those who had subscribed for shares. Held:
Merely subscribing for shares does not constitute the subscriber a
member of the association or partner. It is merely a declaration of in-

105

§ 24] ASSOCIATIONS FOR PROFIT [Chap. II

the articles of association.^" If the company refuses to
recognize a shareholder he is entitled to a decree affirm-
ing his interest and for an account. ^^ The certificate for
shares in an association like the certificate for shares
in a corporation is simply a muniment of title as evi-
dence of the ownership of the share and the issue of
the certificate is not essential in order to constitute
membership in the association." There are some
early cases which refused equitable relief to members
of associations for profit on the ground that mem-
bers should first seek rehef \Nathin the organization.^"

tention by the subscriber to become a partner. The meeting of some
of the subscribers to organize binds none but those who meet. Hence
bill dismissed without prejudice to an action at law of the company on
the subscription. Appeal of Hedge, 63 Pa. St. 273, 277. See also Gal-
veston City Co. V. Scott, 42 Tex. 535, 553.

On winding up a banking partnership with transferable shares it
appeared that some former shareholders had paid judgments recov-
ered against them. They sought to prove these claims against the
estate, btlt claims were disallowed. All creditors of the partnership at
date of dissolution had been paid. Stockdale v. Maginn, 207 Pa. St.
227, 56 Atl. 439. See Sickelsteel v. Edmonds, 158 Wis. 122, 136, 147
N. W. 1024.

1^ Oil land association. Articles forbade increase of capital without
consent of majority of shareholders. Debt incurred in borrowing
money to buy additional land. Crimm's Appeal, 66 Pa. St. 474, 477.

** A shareholder in a joint stock companj', formed to construct a
ditch to supply water to mines, whom the company refuses to recog-
nize as a stockholder, on a bill in equity is entitled to a decree affirm-
ing his interest and dii'ecting an account. Smith v. Fagan, 17 Cal. 178,
181. See also Lesseps v. Architect Co., 13 La. 414.

Bill by shareholder of an unincorporated association for accounting
must be brought for benefit of himself and all other shareholders.
Warth V. Raddc, 18 Abb. Pr. 396.

"> Ycaman v. Galveston City Co., 167 S. W. 710, 720 (Tex.).

-" Hill for receiver and winding up of brewery association. The
agrociment provided for monthly meetings and for a committee to
oversee the managers and call mcH'tings if managers misbehave. Held:
Will not take juri.sdiction till i)laiiitiif has exhausted remedies within
the organization (ap[)arently apjjeal to tlic committee or to a meeting)
(p. 158). But intimates that in an emergency court might act when
delinquency clearly made out (p. 159). Carlen v. Drury, 1 Ves. & B.
154.

A mutual fire insurance company was organized under a deed pro-
viding for certain officers, auditors, etc. It in fact neglected to carry

100

Chap. II] TERMINATION OF LIABILITY [§ 25

This is apparently on the analogy of the rule re-
garding non-profit associations which will be dis-
cussed later.^^

§ 25. Termination of Liability

In the absence of agreement, a partner cannot divest
himself of his connection with the firm without the
consent of his co-partners ^ nor make an assignee of his
interest a member of the firm without such consent.^

out these provisions and left the management entirely to its founder.
Certain members on behaK of the whole now bring a bill to enjoin him
from receiving more premiums charging misconduct. Held: Asso-
ciation vaUd as long as membership not transferable, but court cannot
interfere where the members have failed to carry out the provisions of
the deed of trust. It must be treated as a general partnership. If they
will not act on their deed the court cannot manage their affairs for
them. (Hard to understand unless it means that they must first seek
reUef within the society.) Ellison v. Bignold, 2 Jacob & Walker 503,
512.

Theatre Association. Shareholders right to seats. The court will
not interfere to enforce duties which are properly subject of internal
regulation (p. 423). Power to manage business conferred on board of
directors includes power to remit rent (p. 419). Treated as partners
throughout. Fareu-a's Appeal, 3 Walk. 416 (Pa.).

An association was formed by subscriptions to build a high school.
It is not clear whether it was a coi-poration or not. The building was
built and shares were issued. The holder of nearly all the shares re-
paired the building and was about to move it off. Held: Remaining
shareholders may have a temporary injunction. Action by association
not a requisite preliminary because defendant controls stock. Asso-
ciation should be made party. Marston v. Dm-gin, 54 N. H. 347, 374.

21 See § 58.

1 Strang v. Osborne, 42 Cal. 187, 94 Pac. 320 (mining irrigation ditch
association. The opinion sometimes talks as though the members were
merely tenants in common); Stimson v. Lewis, 36 Vt. 91, 95, 98 (co-
operative store). Contra, Norwood v. Francis, 25 App. D. C. 463, 471.

A charge that if a member of a banking association notified the bank
to transfer his stock to another and the bank dechned to do it and he
thereafter acted as director and voted by proxy at stockholders' meet-
ing he was still hable to creditors as a partner was correct. So if he
was held out as a director to his knowledge. Bradford v. National
Benefit Ass'n, 26 App. D. C. 268, 273.

2 Stimson v. Lewis, 36 Vt. 91, 95, 98.

An association was formed to prosecute a voyage to California and
carry on business there. Constitution prohibited any member from

107

§ 25] ASSOCIATIONS FOR PROFIT [Chap. II

But in associations for profit the consent is given in ad-
vance and provision for transferable shares is almost
always made.^ Assignees of shares are not subject to
claims the association may have against their as-
signors.^

A general assignment by a shareholder is a with-
drawal where shares are transferable.^ But where the
articles of association provide a special method for
transfer of shares, that method must be followed.^
Transfer of shares that have been recognized by the
association are valid though not carried out according

withdrawing without the consent of the majority and declared penalty
of forfeiture of his share for such withdrawal. Shares also made trans-
ferable by endorsement on the certificate. In an action bj^ a shareholder
against the president for a share in the profits, Held: Since the con-
stitution provided for a president and directors who should have ex-
clusive direction of all concerns of the company, "it became rather a
joint stock company than a proper co-partnership. If they had been
co-partners, each individual could have disposed of the whole property,
inciu-red habiUties and made piu'chases." Though he allowed an out-
sider to represent his share for a time, plaintiff had no power to intro-
duce him as a member. Hence the acts of this pai'ty could not forfeit
plaintiff's share. Cox v. Bodfish, 35 Me. 302, 306.

^ The peculiar characteristic of joint stock companies, as distinx
guished from partnerships, is the right of the holder of any interest in
it, whether gi'eat or small, to transfer it to a stranger without the con-
sent of his co-owners. Cincinnati Co. v. Citizens' Bank, 11 Ohio Dec.
.50.

'' Shareholder in an association cannot object to the right of another
shareholder to receive a dividend on the ground that the transfer to
him was without authority and that the shares were subject to a claim
of the as.sociation against a former holder when the present holder took
for value and without notice and the trustees for the shareholders made
the transfer on their books without objection. Cohen v. Gw^ynn, 4
Md. Ch. 357, 3G2.

Holders of sliares in a joint stock land company are not subject to
any set-off wliich the association has against the Jissignors (p. 320).
Agent unlike a partner is entitled to claim compensation for serv-
ices (p. 327). Possibly it was incoi-porated (p. 321). Spence v.
Whitaker, 3 Port 297 (Ala.).

' Swoope V. Wakefi(!ld, 10 Pa. Super. Ct. 342, 351 (cooperative
store).

' Robbins v. Butler, 24 111. 387, 426. At least as between the mem-
bers. Wadsworth v. J:)uncHn, 164 111. 360, 362, 45 N. E. 132; Harper
V. ItuynioiKl, 3 Bosw. 2'J, 39 (X. Y.).

108

Chap. II] TERMINATION OF LIABILITY [§ 25

to its rules. '^ A member who sold his shares was al-
lowed to sue for the purchase price though he had not
transferred it in the way required by the deed of
trust. ^

New shareholders are not liable for preexisting debts
unless they assume them expressly or impliedly.^
Those who were members at the time a contract was
made are liable to the creditors upon it ^° and dissolu-

7 Rianhard v. Hovey, 13 Ohio 300, 302.

On a shareholder's bill for winding up a joint stock company which
was insolvent the plaintiffs tried to bring in former shareholders on the
ground that the transfer of their shares had not been carried out as
provided in the by-laws. Held: Since the transferees had been rec-
ognized as partners by the plaintiffs they cannot now set up informal-
ity in the transfer (p. 446). Equity would at any time have compelled
a transfer and have compelled payment of dividends declared (p. 447).
The fact that some of the plaintiffs have paid debts of the association
does not put them in a better position. Doubtful if creditors with
notice could complain (p. 448). Wells v. Wilson, 3 Ohio 425.

8 Alvord V. Smith, 5 Pick. 232, 235.

3 M. W. Powell Co. V. Finn, 198 111. 567, 64 N. E. 1036; Beaman v.
Whitney, 20 Me. 413, 420; Fuller v. Rowe, 57 N. Y. 23, 26; Shamburg
V. Ruggles, 83 Pa. St. 148; BarndoUar v. Du Bois, 142 Pa. St. 565, 21
Atl. 988; Thomas v. Clark, IS C. B. 662.

Issue whether shareholders in an unincorporated association were
liable for loans made by the plaintiff before they received their cer-
tificates. In a very loose charge to the jury the court said that they
were not liable as partners for preexisting debts unless they accepted
certificates with a knowledge of existing conditions that would amount
to assumption of debts. National Park Bank v. Nichols, Fed. Cas.
10047 (C. C. — 111.).

10 Wadsworth v. Duncan, 164 111. 360, 365, 45 N. E. 132 (bank);
Moore v. May, 117 Wis. 192, 204, 94 N. W. 45 (cooperative store).

On a shareholder's bill for specific performance of a contract to con-
vey land to an unincorporated association the question of the com-
petency of witnesses under the old law arose. Held : Shareholders were
liable as partners until transfer of their shares had been recorded on
the books of the association as requu'ed in the articles of association.
Robbins v. Butler, 24 111. 387, 426. But not where the transfers had been
recognized by the association though not carried out according to its
rules. Rianhard v. Hovey, 13 Ohio 300, 312.

In this connection the following case is of interest. A bond for a
deed in an unincorporated association is void, for not being a corpora-
tion it could not so contract. To have been vahd against the associa-
tion it should have been executed by all the individual members either
personally or by agent. Vattier v. Roberts, 2 Black. 255 (Ind.).

109

§ 25] ASSOCIATIONS FOR PROFIT [Chap. II

tion does not terminate liability on existing contracts. ^^
A defendant is liable to one who dealt with the associ-
ation while he was a member on contracts made before
the plaintiff had notice of the defendant's withdrawal. ^^
A shareholder in a formal association for profit, how-
ever, in most cases would prove to have been a dormant
partner who is not bound, in order to avoid liability on
future contracts, to give notice of dissolution to those
who have dealt with the firm while he was a member. ^^

" "An association of this kind (insurance) cannot go out of exist-
ence while its contracts and obhgations are outstanding." Camden,
etc. R. R. V. Pennsylvania Guarantors, 59 N. J. L. 328, 35 Atl. 796;
Burgan v. LyeU, 2 Mich. 102 (mining partnership, but the distinction
usually made between such partnerships and ordinary partnerships
was not noticed).

12 Grady v. Robinson, 28 Ala. 289, 297 (bank) ; Pettis v. Atkins, 60
lU. 454, 457; McDowell v. Joice, 149 111. 124, 137, 36 N. E. 1012 (land
speculation); Tyi-rell v. Washburn, 6 Allen 466 (cooperative store);
Farnham v. Patch, 60 N. H. 294, 326; N. Y. Bank v. Crowell, 177 Pa.
St. 313, 35 Atl. 613; Tenney v. N. E. Protective Union, 37 Vt. 64, 68
(cooperative store).

Cannot hold him on contracts made after knowledge of withdrawal.
Bank depositor. Wadsworth v. Duncan, 164 111. 360, 45 N. E. 132.

Plaintiff must have known of his former membership. Bank. Nor-
wood V. Francis, 25 App. D. C. 463, 472.

A member of a mining partnership sold his share. Held : He is not
liable to employees hired subsequently or to prior employees who con-
tinued work with loiowledge of the sale or of such facts and circumstances
as were sufficient to have put a reasonably prudent person on inquiry as
to the sale. But he is liable to former employees who continued to work
without notice. Kelley v. M'Namee, 164 Fed. 369, 375 (C. C. A. —
Ala.ska).

Member of a mining partnership like any other is liable after dissolu-
tion for new debts to prior creditors if he docs not give them personal
notice of retirement. So when the firm transferred to a corporation,
recording the deed was not notice. Dcllapiazza v. Foley, 112 Cal. 380,
384, 44 Pac. 727.

Tenants in common of a mine employed defendant to work it for
them. After a time plaintiff notified the other owners and the defend-
ant that he. would not thereafter empk)y defendant. Plaintiff brings
an action for a share in the jiroceeds of the mine in the hands of the
deferirlant. Held: I'laintiff's notice; amounted to a termination of the
I)artri(THliip and tlien^aftcr i)laintiff was not liable for defendant's
salary and defendant could not withhold it from the proceeds of the
mine in lii.s jHw.se.ssion. Slater v. Haas, 15 Col. 574, 25 Pac. 1089.

'* GroHvenor v. Lloyd, 1 Met. 19.

no

Chap. II] DISSOLUTION BY TRANSFER [§ 26

It has been held that the shareholders at the time
action is brought, not those who had been share-
holders when the contract was made, are the ones en-
titled to sue upon it.^"* In litigation between members
an agreement that retiring members cease to be liable
for debts and that incoming members are liable for
outstanding debts should be enforced. ^^

§ 26. Dissolution by Transfer

Transfer of a share may be held technically to dis-
solve the association,^ but subject to the implied agree-

" Members of an unincorporated association with transferable
shares sued an agent for money withheld. It was objected that one
of the plaintiffs acquired his share by transfer. Held: "The implied
promise of one holding money for such an association must be under-
stood to be to make payment to those who are associates when the
suit is brought." Willson v. Oliver, 30 Mich. 474.

1^ In winding up the Home Grocery Co., the manager who had
advanced money previously to pay debts of the association claimed
reimbursement from the other members. Held: He did not have to
make defendants certain persons who had withdrawn according to the
articles of association, though they were members when the claim
arose. There was no specific stipulation in the articles about Hability
of withdrawing members for existing debts, but court i-eached the re-
sult by an interpretation of the agreement. EngvaU v. Buchie, 73
Wash. 534, 132 Pac. 231.

Such an agreement seems to have been imphed from the fact that
the shares were transferable m Smith v. Virgin, 33 Me. 148, 156.

Shareholders in an association or continuing partnership with trans-
ferable shares have no equity to compel former shareholders whose
transferees have been accepted in their places by the plaintiffs to con-
tribute to the payment of debts of the association incurred before their
transfer of shares. They are liable only secondarily for such debts,
the present shareholders being primarily liable. Savage v. Putnam, 32
N. Y. 501, 506.

^ Lord Eldon suggested that unless the contrary was provided in
the articles, a retiring member would have to notify all other share-
holders before a dissolution resulted. Van Sandau v. Moore, 1 Russ.
441, 463. But the ordinary provision for transfer of shares would
doubtless have satisfied him. Lindley says transfer results in a new
firm. Lind. Part 7th Eng. Ed., p. 401. Ace. McDowell v. Joice, 149
lU. 124, 135, 36 N. E. 1012.

An unincorporated bank failed. A depositor sued certain share-
holders. Defendants pleaded non-joinder of various shareholders who

111

§ 26] ASSOCIATIONS FOR PROFIT [Chap. II

ment of the other members to continue as partners,
so that the others who have not transferred their
shares cannot escape future HabiUty on that ground.
Most courts, however, have held that transfer of a
share in an unincorporated association with transfer-
able shares does not dissolve the partnership.

The defendant, a corporation (which could not hold
the real estate in question legally) organized the Ottawa
Development Syndicate to buy land to give to facto-
ries and sell to raise cash to give to other factories. At
a public meeting the syndicate was formed by subscrip-
tions to an agreement of certain sums for certain pur-
had previously sold their shares to the association or to other share-
holders and also brought a bill in equity for dissolution and receiver
making the other members defendants. In only one case had the
shareholders selling out had theh' transfer made on the books of the
company as provided in its articles. Held: Members are partners
and hable for debts of association unless they shifted habihty in the
very manner provided by the articles of association (p. 362). As be-
tween members a different rule would prevail from that as against
third persons. After a sale, the remaining members tacitly formed a
new partnership (p. 363). As between the remaining partners a new
firm and implied assumption of debts (p. 364). If a depositor knew of
change in membership, acquiesced in it and made other deposits, he
could not hold the retiring member even though the transfer was not
strictly according to rules of association (p. 364). A depositor with
notice who are shareholders could hold all who were shareholders when
he made his deposit (p. 365). Continuing partners have no right to
require that retiring partners be made defendants (p. 365). Wads-
worth V. Duncan, 164 111. 360, 45 N. E. 132. But see Hossack v. Dev.
Ass'n, 244 111. 274, 91 N. E. 439.

An unincorporated bank with provision for transfer of shares.
Held: After such transfer the continuance of the business without in-
terruption does not vai-y the gcmeral rule that a transfer of a share in a
firm is a dissolution and the new firm is not liable for the debts of the
old nor do tiio creditors have any liens on the assets of the old. Mead-
ville Sav. Bank Estate, 2 Pa. Super. Ct. 618, 645.

A bill by shareholders in a scythe manufacturing company for
contribution and winding up. Hekl : A sale of his interest in the
property of the company by tlie majority shareholdon* is a dissolu-
tion. It was not a sale of sliares. Since this association had trans-
ferable shares, those who W(;re shareholders at the time of dissolu-
tion are the ones who are iiabh; for its debts. Smith v. Virgin, 33
Me. 148, 156.

112

Chap. II] DISSOLUTION BY TRANSFER [§ 26

poses stipulating that for each subscription was to be
issued certificates in equal amounts of preferred and
common stock, preferred to be exchanged for lots of
like value and common ''to represent the interest of
the holder in the proceeds and profits of the undertak-
ing, both of said certificates to be transferable." Title
to the land was to be taken in name of the trustee. It
was agreed that the defendant should ''have full and
exclusive management and control of said lands and of
the action of the trustee in regard thereto and of all
business connected with the undertaking." The plan
was executed and the plaintiff was the holder of many
shares of both kinds, but the rest of the preferred share-
holders had exchanged shares for land. The common
certificate recited that it only entitled the holder to his
proportion of any proceeds or profits of the undertaking.
On a bill for the winding up of the association and sale
of the remaining lands asking to set aside certain con-
veyances and alleging mismanagement, the court held
that the subscribers in many respects should be held
partners. "The legal status of unincorporated socie-
ties and voluntary associations has not been very sat-
isfactorily determined on many points. While the
courts will generally treat the members as ordinary
partners and the associations as partnerships, they will,
as far as possible, give effect to the articles of associa-
tion or agreement among the members themselves
when they themselves are the only ones interested. If
such an association be organized for pecuniary profit
so far as the rights of third persons and liabilities of
the members to strangers are concerned, such associa-
tion is usually considered as a partnership. . . . This
syndicate agreement made the subscribers substan-

113

§ 26] ASSOCIATIONS FOR PROFIT [Chap. II

tially a stock company. There is nothing illegal in such
an agreement with transferable shares. The transfer-
ability of the shares makes such an association different,
not merely in magnitude but in other ways, from ordi-
nary partnerships because the association is not based
upon mutual trust and confidence in the skill, knowl-
edge and integrity of the partners. The sale of shares
by a member, the shares being transferable, is not a
dissolution, and the death of a member is not a dis-
solution. That the shares are transferable is evidence
of the intent that such death or transfer shall not
result in a dissolution." ^

In another case the plaintiff sued for goods sold a
cooperative store of which the defendant had been a
member. He had moved out of town in 1859, giving
no notice of withdrawal from the association to the
plaintiff or his associates. In 1860 another member had
died and the defendant claimed that this dissolved the
association and that he was not liable for goods sold
thereafter. It was held that the defendant was liable.
Even if as between himself and his associates he was
not a member, the plaintiffs having dealt with the asso-
ciation while he was a member were entitled to treat
him as such till they received notice of withdrawal.
The court said that it was not necessary to decide
whether the association was strictly a partnership or not,
since it is found as a fact that it was intended to have
perpetuity and not to be dissolved by death or with-
drawal of any member. "Hence, neither the death or
withdrawal of any member would affect the liability

2 Tli(! court furtluT held t.liat it could not require dissolution at
any time, bc>c;aus(! it could not cant^el the partnershij) agreement con-
trary U) its terniH and it was evident that there was no definite time for
clo.sinK the Hyndicate. Ilossack v. Development Ass'n, 244 111. 274,
2*H, 202, 01 N. E. 439.

HI

Chap. II] DISSOLUTION BY TRANSFER [§ 26

of those who continued to be members for debts con-
tracted in the name and for the benefit of the asso-
ciation." ^

One well-established exception to the general rule of
dissolution of a partnership by transfer of a share is
that applied in the case of mining partnerships. At
an early date mines were operated by joint stock com-
panies to which the courts said the rule of delectus per-

3 Tenney v. New England Protective Union, 37 Vt. 64, 68.

Transfer of share does not effect a dissolution. Carter v. McClure,
98 Tenn. 109, 116, 38 S. W. 585 (cooperative store).

Three persons signed articles forming an association to pubhsh
New York Times. The capital and assets were divided into shares. It
was stipulated that shares might be sold after being offered to the asso-
ciation but that purchaser could not participate in affairs of associa-
tion, and until new certificate was issued to him should have no right in
profits, and even after that should have no voice in conduct of business
but only the right to receive the share in profits allotted to him. Held:
Agreement contemplates no dissolution or sale. Vendor still to remain
partner as to management. Because not first tendered to the asso-
ciation the sale was not valid as between association and vendor or
vendee, though valid as between them. Vendee would have to get
power of attorney from vendor to get the profits. On the dissolution
of the association this limitation ceased and the trustees in Uquidation
are under obhgation to vendee of the shares. Harper v. Raymond, 3
Bosw. (N. Y.) 29, 39.

Association of owners of mill privileges to build a reservoir formed
under a statute. Held: Withdrawal did not effect a dissolution. Could
withdraw only as specified in the articles. Troy Iron, etc. Factory v.
Corning, 45 Barb. (N. Y.) 231, 243.

Held: No dissolution where articles of partnership permit transfer
of shares but rights of third parties not affected. Merrick v. Brainerd,
38 Barb. 574, 578.

A land syndicate. Heirs of deceased shareholder brought petition
for partition of the land held by the trustees. Held: Have no interest
in the property, only in the profits. If a partnership, it is not terminated
by death or transfer of shares, for delectus personae was unimportant
consideration. Horner v. Meyers, 29 Ohio Weekly Law Bulletin
403.

By-laws of a cooperative partnership association provide for with-
drawal of old and reception of new members. A general assignment
by a shareholder is such a withdrawal and purchaser at assignee's
sale gets only vendor's rights as a withdrawing member. Though ordi-
narily a partner's withdrawal effects a dissolution, this may be modified
by articles and was here. Swoope v. Wakefield, 10 Pa. Super. Ct.
342, 351, 44 Weekly N. C. (Pa.) 209.

115

§ 26] ASSOCIATIONS FOR PROFIT [Chap. II

sonae did not apply.^ This doctrine has been devel-
oped into the modern law of mining partnerships, as
previously noted,^ in which it is well settled that trans-
fer of a share whether inter vivos or on death or bank-
ruptcy of the shareholder does not work a dissolution.
As was said by Judge Field, ''Associations for working
mines are generally composed of a greater number of
persons than ordinary trading partnerships, and it was
early seen that the continuous working of a mine, which
is essential to its successful development, would be im-
possible or at least attended with great difficulties, if
an association was to be dissolved by the death or
bankruptcy of one of its members or the assignment of
his interest. A different rule from that which governs
the relations of members of a trading partnership to
each other was, therefore, recognized as applicable to
the relation to each other of members of a mining asso-
ciation. The delectus personae which is essential to
constitute an ordinary partnership has no place in
these mining associations."*^ It is suggested that this

* Leach, M.R. : "It is true that a mining concern differs in some
particulars from a common partnership — the shares are assignable
and the death or bankruptcy of the holder of shares does not operate
as a dissolution — but it has been repeatedly held to be in the nature
of a trading concern." Fereday v. Wightwick, 1 Russ. & M. 45, 49.

6 See § 7 and § 22, notes 2 and 3.

6 Kahn v. Smelting Co., 102 U. S. 641, G45, 26 L. ed. 266; see
ace. Kimberly v. Arms, 129 U. S. 512, 32 L. ed. 764, 9 S. Ct. 355; Loy
V. Alston, 172 Fed. 90, 92 (C. C. A. — Mo.).

"One member of a mining partnership has the right without con-
sulting his associates to sell his interest to a stranger." "There is
no relation of trust or confidcmce l)etwcen mining partners which is
violated by the sale and assignment by one partner to a stranger or to
one of the associates, of his share in the pi-ojierty and business of the
association." Hence a partner has no right to share in the purchase
by another partner of the shares of a third. Bissell v. Foss, 114 U. S.
252, 261, 29 L. ed. 126, 5 S. Ct. 851.

"Such is the uncc^rtainty of mining operations that few are willing
to risk all their rncians in such undt^rtakings; and it is therefore cus-
tomary for a number of persons to unite in the enterprise; and often

116

Chap. II] DISSOLUTION BY TRANSFER [§ 2G

doctrine has no peculiar relation to the business of
mining, but is generally applicable to partnership asso-

the interests owned by each differ greatly in amount according as each
is able to furnish means, or is wiHing to take the risk. As a general
rule it is impracticable for each proprietor to work his interest in the
mine separate from the others; hence arises the necessity for an organ-
ization of some kind to work the mine such as a coi-poration, joint
stock company or mining partnership. The company in the present
case is one of the latter class. As each owner has a right to sell and
convey his interest at any time, and as in ordinary partnerships such
sale would dissolve the partnership and compel a winding up and set-
tlement of the business which would be most disastrous to a mining
enterprise, it has become an established principle that such sale does
not dissolve a mining partnership but it continues as before. Such a
radical change in the law of partnership necessitates other changes.
One result is that new members are thus introduced into the company
without the consent and often against the wishes of the other mem-
bers; and it would be most unjust to subject each proprietor to per-
sonal habihties which might sweep away all his property, created
against his consent by those who became members against his wishes.
Hence arises the necessity of establishing new rules for such partner-
ships differing from those regulating ordinary partnerships, especially
those relating to the power of one member or a majority of the mem- '
bers, or of the superintendent or managing agent to make contracts
binding upon the company or its members and also regulating the
extent and nature of the hability of each proprietor for the company
debts as between themselves and third persons." Hence managing
agent did not have power to bind members on a note given for lumber
for the mine. SkiUman v. Lachman, 23 Cal. 198, 206.

Bill for dissolution and accounting of a mining partnership and
conveyance of share in the mine. Held: Mining partnerships com-
bine some of the incidents of tenancies in common, — a species of
quahfied partnership (p. 495). Plaintiff entitled to reUef whether
called partnership or not (p. 496). Settembre v. Putnam, 30 Cal. 490.

Ace. with Field's statement (p. 48). Here the partnership was in
working the mine, the title to the mine not being contributed as
capital but being held as tenants in common (p. 49). As between
the partners, the incoming partner is not Uable for prior firm debts
(p. 51). Majority rule (p. 52). Patrick v. Weston, 22 Col. 45, 43
Pac. 446.

Elaborate dictum on mining partnerships begins on page 350. Rule
as to transferable shares and limited authority (p. 353). Otherwise
the general rules of partnership apply and so as to real estate (p. 367).
What is partnership property may be proved by parol regardless of
the statute of frauds (p. 358). Meagher v. Reed, 14 Col. 335, 24 Pac.
681.

An assignment by a mining partner of his interest in the metals and
ores that might be acquired as his share in the company did not trans-
fer his share and did not make the transferees partners. Phillips v.
Jones, 20 Mo. 67, 69.

*117

§ 27] ASSOCIATIONS FOR PROFIT [Chap. II

ciations with, transferable shares. This is shown by the
decisions that hold a mining partnership may be organ-
ized on the principle of delectus peisonae and be subject
to the ordinary rules of partnership.' The Massachu-
setts court has not expressly said whether transfer of a
share effects a dissolution or not, but has said that
transferabihty of shares is legal. ^

§ 27. Dissolution by Death

Does death dissolve an association for profit? Tech-
nically, it may be a new association after the death of
each member, but by joining the association there is
an impUed agreement to continue in each new associa-
tion thus formed,^ or, as has been said, less evidence of

" The agreement of partners to work a mine may be a contract of
partnership in the ordinary sense, with all the usual limitations,
including the delectus personae. Decker v. Howell, 42 Cal. 636,
642.

"WTiere in a partnership the delectus persojiae exists and the par-
ties intend that the confidential relations of partners shall exist and so
treat the business relation, the mere fact that the business engaged
in is the operation of a mine should not alter the habihtj' of the indi-
vidual partners." Dailey v. Fitzgerald, 17 N. M. 137, 125 Pac. 625,
631.

A mining partnership may be formed in two ways: (1) By opera-
tion of law where there is no partnership agreement but cooperation
by co-o\s'ners in the working of mining property. (2) By agreement of
the co-owners. In the former there is no delectus personae. In the
latter there is. Here it was a commercial partnership and sale of an
interest worked a dissolution. Freeman v. Hemenway, 75 Mo. App.
611, 616.

An agreement of three tenants in common of a mine "to mine and
operate said mining property as a company" created a partnersliip
(p. 655). No one can become a member of a firm without the knowl-
edge and consent of all the partners (p. 654). Bybee v. Hawkett, 12
Fed. 049 (C. C. — Ore.).

8 Phillips V. Blatchford, 137 Mass. 510; Ashley v. Dowling, 203
Mass. 311, 89 N. E. 434.

1 Tyrrell v. Washburn, 6 Allen 466. In a case of joint stock asso-
ciation which ai)parently never got beyond the subscription stage, it
Wits said that the iiartiicrship was dissolved by the death of a sub-
scriber. It (lid not api)ear whether the shares were to have been trans-
ferable. Vilas V. Farwell, 9 Wis. 460, 462.

118

Chap. II] DISSOLUTION BY DEATH [§ 27

an intent to continue the business is required.^ No
distribution of the assets can be compelled, but the
business continues as before/^ Upon death of a member
where it is provided that ''the representative of the
deceased shall succeed to the rights of the deceased in
the certificate and the shares it represents, subject to
the declaration of trust," there is imposed on the estate
of the deceased the liability the deceased would have
incurred towards debts regardless of whether the execu-
tor decides to become a member of the firm or not. In
an ordinary partnership the estate would not become
liable for future debts unless the executor decided to
become personally a partner, even where the articles
had stipulated that he should become a partner. But
a majority of the court held that in an association
there was by this provision an implied agreement of
indemnity by each partner against the debts of the asso-
ciation as long as he held his shares, which agreement
could be enforced against the estate of the deceased.^
Some courts without entering into such refinements
simply hold that an unincorporated association with
transferable shares is not dissolved by death of a share-
holder.^

2 Machinists' Bank v. Dean, 124 Mass. 81, 84.

3 Taber v. Breck, 192 Mass. 355, 361, 78 N. E. 472.

* Phillips V. Blatchford, 137 Mass. 510, 514. Of course the executor
does not become a member or personally hable until he consents. WeUs
V. Murray, 4 Ex. 843, 868.

5 Wilhs V. Chapman, 68 Vt. 459, 35 Atl. 459 (cheese factory) ; Carter
V. McClure, 98 Tenn. 109, 116, 38 S. W. 585 (cooperative store).

"The only distinctions between a trading company and an ordinary
co-partnership are that the capital of a joint stock company organized
for trading purposes is usually divided into shares and a transfer of a
portion of the shares without the consent of the other shareholders on
the death of a shareholder does not work a dissolution as it would in
an ordinary partnership unless it is so stipulated in the articles of
agreement." HunneweU v. Willow Springs Co., 53 Mo. App. 245, 248.

A joint stock association was formed to deal in mineral lands. Large

119

§ 28] ASSOCIATIONS FOR PROFIT [Chap. II

§ 28. Winding up Informal Associations for Profit

A member may compel dissolution and liquidation
against the will of the majority when the time fixed

stockholder died. After his death valuable deposit discovered and
land sold at great advance over cost. Issue whether dividend from
this went to hfe tenant as income or remainderman as principal.
Trustees held legal title. Shares transferable. Annual meetings.
Held: The company is a partnership. Whatever its members' lia-
bilitj' to third persons may be, it " is an artificial juridical person capa-
ble of acquiring, holding and selling property" (p. 58). The relation
of stockholders is fixed by their agreement. As between themselves
they are hable for losses in proportion to stock. Have no power to use
the name of the company, interfere with its business or bind it in any
manner. This they have entrusted to trustees. Had only a right to
elect trustees and share in profits. No title in land as tenant in com-
mon or otherwise. Interest in it is personal estate, to be ascertained
only by an account (p. 59). Company not dissolved by member's
death. Dividend is personal estate and if it represents profit made
since the death of a member it is like other income of his estate. The
increased price came not from change in actual value, but from correct
knowledge of that value. This occurred after member's death. Com-
pany formed not to mine, but to buy and sell. Hence income (p. 61).
OUver's Estate, 136 Pa. St. 43, 20 Atl. 527.

Association under declaration of trust to buy and sell a tract of
land. Transferable shares. Only eight certificates. Action for com-
mission against shareholders. Held: At common law joint stock asso-
ciations are legal. "Such an association . . . not organized for en-
gaging in the real estate business but for the purpose of acquiring and
holding title to a particular piece of real estate, is not a general business
partnership. It is not a violation of the Constitution or statutes for a
number of people to get together to acquire a particular piece of prop-
erty and place the title of the same in the name of a trustee whose
powers and authority are definitely limited and defined and subject
to instructions from the ' shareholders either directly or individually
through a board electexl by the shareholders at regularly constituted
meetings of the shareholders. This constitutes simply a definition of
the trusts and powers subject to which a particular piece of real estate
is held" (p. 380). A partnership may stipulate that death shall not
dissolve it and waive delectus personne (p. 382). This is a distinction
between joint stock companies and ordinary partnerships. "All who
have dealings with a joint stocik (;ompany know that the authority to
manage the business is conferred upon the directors and that a share-
holder as such has no power to contract for the company" (p. 384).
"In joint stock companies the shareholders have no ])owers as agents
unlc;ss such j)owers arc granted eitli(>r expressly or by implication or
by acquiescence of such sliareliohh'rs or association" (p. 368). Hence
held that death of ])resideiit did nol, dissolve the assotiiation and that
the Bccretary had no power to employ the i)laintilT (p. 390). Dissent:

120

Chap. II] WINDING UP INFORMAL ASSOCIATIONS [§ 28

by the articles expires ^ or when the purpose of the en-
terprise has become impracticable.^ Dissolution has
been decreed on partition of a minority wrongfully
excluded from the property and business by the major-
ity.^ It was denied in one case where a majority of the
shareholders opposed dissolution and where the loss
from a winding up would exceed that of the plaintiff on

That majority have created a hybrid organization half corporation
and half partnership (p. 399). Spotswood v. Morris, 12 Idaho 360, 85
Pac. 1094, 1102.

1 Clerk's Inv. Co. v. Sydnor, 19 A. C. (D. C.) 89, 96; Mann v. Butler,
2 Barb. Ch. 362, 368.

2 Von Schmidt v. Huntington, 1 Cal. 55.

A winding up was ordered of an unincoiporated cheese factory,
supposed to be run for profit, but which had made no profit for twenty-
three years. Wilhs v. Chapman, 68 Vt. 459, 35 Atl. 459.

Land was conveyed to the members of a joint stock association to
build a hotel. Separate deeds to each provided that it should be held
without partition. Held : This was a vahd condition, not a pei-petuity,
for each could dispose of his share. Waived a statutory right. Failure
to hold meetings for a dozen years is not of itself a dissolution. Hence
petition for partition denied. Hunt v. Wright, 47 N. H. 396, 402.

A joint stock association for holding county fairs did no business
for eight years. It owned real estate. Then the last president pur-
ported to reorganize under the same name. New members were ad-
mitted and new shares issued, new property acquired and debts in-
curred. Some of old shareholders did not have actual notice of the
meeting of reorganization. The new association purported to convey
the land of the old. Held: Conveyance void. Separate associations.
The old had practically become extinct and should have been wound
up. Allen V. Long, 80 Tex. 261, 267, 16 S. W. 43.

Dissolution of a mining partnership was refused on petition of a
purchaser of a share who alleged merely lack of harmony between the
partners as to the further operating of the lease. He had a perfect
remedy by sale of his share. Blackmarr v. WiUiamson, 57 W. Va. 249,
254, 50 S. E. 254.

^ When a majority shareholder takes possession of the property
and business of the association and excludes minority therefrom and
no board of directors is elected as contemplated by the agreement, the
majority may petition for dissolution and winding up. Werner v.
Leisen, 31 Wis. 169, 171.

Bill for dissolution of partnership of a ferry association by a trustee
excluded by others from his office. Articles provided for election of
trustee on death or resignation, but no fixed term of office. Plaintiff
never resigned, but voted for self and others at an election. Held:
Still trustee and entitled to maintain this bill. Berry v. Cross, 3 Sandf.
Ch. 1, 5.

121

§ 28] ASSOCIATIONS FOR PROFIT [Chap. II

a sale of his shares.^ The petition should ask for an
accounting,^ and all shareholders and creditors are
proper parties defendant.^ A bill in equity for the ap-
pointment of a receiver is appropriate procedure ^ and
in such a suit contribution by the other members to the
debts of the association -wWl be enforced.^ When some
of the shareholders are insolvent or out of the juris-
diction, the rest are liable in proportion to their
shares.^ As to creditors, of course, each is Hable for

4 Hinkley v. Blethen, 78 Me. 221, 3 Atl. 6.55.

= A shareholder in a joint stock company cannot bring an action
against the company to compel pa\Tnent to him on Uquidation of the
par value of his share and dividends, but must proceed to an accoimt-
ing after dissolution. Lesseps v. Architect Co., 13 La. 414.

The proper procedure to wind up a mining partnership is account-
ing and dissolution. Xisbet v. Xash, 52 Cal. 540, 550.

« Randolph v. Xichol, 74 .\rk. 93, 84 S. W. 1037.

" Clerk's Inv. Co. v. Sydnor, 10 A. C. (D. C.) 89, 96 (real estate in-
vestment association); Henry v. Simanton, 64 X. J. Eq. 572, 54 Atl.
153.

* Hodgson V. Baldwin, 65 111. 532, 537 (cooperative store. In this
case the court in fact enforced the principle of exoneration and not
merely contribution). See § 24, note 16 and § 31, note 11.

Though no calls or assessments were made as contemplated by a
subscription paper, a bill for contribution may be brought after dis-
solution of the partnership and the personal representatives of a de-
ceased subscriber are necessary parties. Still r. Holbrook, 23 Hun
517, 519.

The same equitable rules are appUcable to the winding up of a min-
ing partnership for oil drilling as a general partnership and the firm
assets are to be exhausted before individual habihty is enforced. Bart-
lett V. Boyles, 66 W. \'a. 327, 332, 66 S. E. 474.

' A bill in equity for contribution between members of a joint stock
ferry company is maintainable. The debts were contracted for the
benefit of the company and as between themselves they were ulti-
mately liable in proportion to their interests. As to creditors, they
were liable for the whole. \Mien some of the members are insolvent
or out of the jurisdiction the plaintiff may recover in equity a contribu-
tion for the whole from those who remain. \Vhitman v. Porter, 107
Ma.ss. 522, 524.

On proceeding for winding up an express company all solvent mem-
bers must contribute to the dcbt.s pro rata disregarding the insolvent.
Morri.soy i-. Weed, 12 Hun 491, 496.

Plaint iff bank was a mernbiT of a joint stock company running a
mill and loaned money to it for which it sues members. Held: Fact
that it w:i.4 a member or that the membership was ultra vires is no de-

122

Chap. II] LIMITATION OF LIABILITY [§ 29

the whole. ^° If there is a surplus, the distribution fol-
lows the terms of the existing agreement between the
members. ^^

§ 29. Limitation of Liability of Shareholders

It is familiar law that partners may by agreement
modify as between themselves their common law obli-
gations,^ but that such modifications will not be bind-

fense. Solvent members liable pro rata their shares. Cameron v. First
Bank, 34 S. W. 178 (Tex.).

A purchaser of shares in an unincorporated bank which is insolvent
cannot claim set-off of the price he paid for his shares in an accounting
between the partners. His payment did not go into the capital of the
firm. He is not hable for debts of the old firm. Barndollar v. Du Bois,
142 Pa. St. 565, 21 Atl. 988.

10 Whitman v. Porter, 107 Mass. 522, 524.

11 Winding up a joint stock association formed to exploit land.
Held: "Each holder of a share of stock was in equity a joint owner with
the other shareholders and a partner as to creditors of the company
who were not joint owners" (p. 28). The assets should be distributed
to those who appeared on the books to be shareholders excepting shares
owned by the association and shares of the founders who had guaran-
teed dividends to the others in amount exceeding what they would get
on the distribution (p. 30). Appeal of Moss, 43 Pa. St. 23.

After a voluntary dissolution of a mining company, a shareholder
cannot claim the profits made by the members working severally, nor
can one who advanced him money to buy his share. Scott v. Clark, 1
Ohio St. 382.

Shareholders in a real estate speculation agreed to take certain
shares at a fixed price and also to take the shares remaining unsold.
One subscriber refused to enter into the latter agreement. Held: He
cannot when the speculation succeeds claim any share of the profits
on these excess shares but that in the accounting the shareholders who
agreed to take these shares are not entitled to have the profits apphed
to theii- payment until the profits are divided. Douglas v. Merceles,
23 N. J. Eq. 331.

An informal association bought real estate with subscriptions of
certain members, took title in trustees and issued subscribers' certifi-
cates for theu" subscriptions, agreeing to pay interest. Later consohda-
tion and new certificate failed to recite interest and said "entitled to
shares in the real estate." On winding up, question is to whom proceeds
of real estate go. Held: Trustees really held for the association and the
certificates merely evidenced a loan secured by the real estate. Hence
proceeds first go to pay loan and the surplus goes to association. Craw-
ford V. Gross, 140 Pa. St. 297, 323, 21 Atl. 356.

1 Leavitt v. Peck, 3 Conn. 125.

An unincorporated company to build and operate a steamboat and

123

§ 29] ASSOCIATIONS FOR PROFIT [Chap. II

ing on those who deal with, the firm without notice
thereof.- It is usually said that they are binding on
those who do have notice.^ When we come to apply

wharf was formed by an informal subscription paper. It was under-
stood that the hability of the parties was to be Umited to the subscrip-
tions. The committee in charge incm-red debts and brought a bill for
contribution. Held: The hmitation on habihty was binding as be-
tween the partners and the committee had no authority to incur this
debt. Dictum that such hmitation is not binding on creditors without
notice. "\Miether a ci'editor with notice is bound bj' it is said to be
doubtful. Danforth r. Allen, 8 Met. 334, 342. Ace. Clark v. Reed, 11
Pick. 446, 450 (stage hne).

Defendant was member of a band. The association was not incor-
porated. It had bj^-laws which provided that "If any member shall
leave the band, he leaves all his interest in the band." Defendant re-
tired from the band and carried off an instnunent claimed by the band
and on refusal to siurender was sued in trover. Held: Defendant sub-
scribed to by-laws in ^Tiling and so assented thereto. "This is a vahd
agreement between the members and binding upon them. The con-
sideration upon which the promise of each is founded is the promise of
the rest to do the same thing." Like a subscription paper. Though
this is a partnership and a partner cannot sue another at law while
partnership affairs are unadjusted, here he has voluntarily parted
with his interest in its property and may be sued. Danbury Cornet
Band v. Bean, 54 N. H. 524, 526.

A farmers' union voted to "start a store." Plaintiff was employed
as manager and gave bond. He acted under control of a board of
directors elected by the Union and conducted business under the name
of the Union, but contracted and incurred habihties in his individual
name for which he seeks contribution from the members. Held: The
facts show that the members did not contemplate personal habihty
for the debts of the association but understood that their habihty was
limited to their subscriptions and that changes of members were con-
templated. As between themselves this is not a pailnership. (Strong
dissent of one judge that it was a pai'tnership since it was an associa-
tion engaging in business for profit.) McDonald v. Fleming, 178 Mich.
206, 144 N. W. 519.

2 Tyrrell v. Washburn, 6 AUen 466; see Manning v. Gasharie, 27
Ind. 399, 415; Walbm-n v. Ingilby, 1 My. & K. 61, 76.

Treasurer of a joint stock company overdrew its account with the
plaintiff to pay for work within the scope of the association. Held:
Sliarelioldcrs liable as partners. Their limitations of habihty in their
articles were unknown to the plaintiff. Tradesman's Bank v. Aster,
1 1 W(rnd. 87, 89.

' A joint stock a.ssociation running a country store in its articles
forbade purchase on credit. Officer delivered copy of articles to vendor
and thf^i Ijought on credit. Held: Vendor cannot sue members as
jiartncr.s. Notice of limitation on authority of agent was binding.
Reccjjtion of tlie goods was not ratification. Nothing in that to notify
defendantH. Ilotchin v. Kent, 8 Mich. 526, 528.

124

Chap. II] EFFECT OF NOTICE [§ 30

this rule to the highly developed modern association
organized under a declaration of trust in which it is
desired to abolish all personal liability, many courts
have hesitated to say that mere notice is sufficient.

§ 30. Effect of Notice

There is no decision in Massachusetts, for example,
that if partners agree that certain of their members shall
not be liable to creditors in any form for the debts of
the firm, the creditors, even contracting with notice of
that provision, would be prevented from joining such
members as defendants.'^ Much less that a provision
that no member of the firm should be personally liable
and that a creditor's only remedy would be to attach
firm goods would be enforced by the court. The atti-
tude of the court towards such provisions is suggested
by the following from the opinion in Hussey v. Arnold:
''We do not attempt to determine whether all the pro-
visions of this agreement are enforceable in the courts
or whether there are such considerations of public
policy involved in an attempt of this kind to do busi-
ness without legal liability of anybody for debts in-
curred by the trustees as merit consideration by the
legislature." ^ In England we find a number of cases
dealing with joint stock companies where limitations

1 See Danforth v. Allen, 8 Met. 334, 342.

There was apparently no limitation on the liability of shareholders
in Bodwell v. Eastman, 105 Mass. 525, 527, and the other cases of the
same period relating to express companies. In Cook v. Gray, 133 Mass.
106, 109, some very simple articles of association were interpreted as
not intended to hmit hability of stockholders and they were allowed
joined as defendants in contract at law. Under Massachusetts statutes
it would not be necessary to join all members of an association even
where non-joinder is pleaded in abatement. Bank of Topeka v. Eaton,
95 Fed. 355 (C. C. — Mass.).

2 Hussey v. Arnold, 185 Mass. 202, 204, 70 N. E. 87.

125

§ 30] ASSOCIATIONS FOR PROFIT [Chap. II

similar to those above quoted, although not the form
now most common, were construed. As against a di-
rector of the company ^ and a firm in which a director
was partner, "* such a limitation of liability was held to
prevent recovery. So as between policy holders of a
mutual insurance association where the liabilities are
wholly between members.^ It was held not to bind cred-
itors in the absence of express contract.^

A contrary result was reached in the United States
Circuit Court for Massachusetts. Here the trustees
did refer to the deed of trust in their contract, though
not expressly contracting against liability of share-
holders. It was an action at law on a note of A, "trus-
tee, as trustee under a declaration of trust dated,"
etc. The court held that this obligated the plaintiff
''by its implied agreement in accepting the note to
abide by the terms of the articles of association.
Whether or not the plaintiff examined the articles of
association or knew their contents is of no consequence
because this express provision required it to do so or
take the hazard of not doing it.

"Therefore the only question is whether or not this
implied stipulation limiting its remedy to the general
assets of the association and the property specially
pledged to it, is contrary to the rules of law. Of course
a stipulation in an instrument which fundamentally

' But directors were allowed to charge against the company a loan
obtained to carry on the business after capital was exhausted. Some
evidence of consent of shareholders. The Norwich Yarn Co., 22 Beav.
143.

* The Worcester Corn Exchange Co., 3 De G. M. & G. 180.

^ London Marine Ins. Ass'n, L. R. 8 Eq. 176.

« Greenwood's Case, 3 De G. M. & G. 459, 470, 482. See ex parte
Mcnd(?th, 32 L. J. Ch. 300. Restrictions on liability of partners bind
only thcrns(!lvcH as to their right to contribution, Hawkcn v. Bourne,
8 M. & W. 703; Smith v. Hall Glass Co., 8 Com. B. 008, 11 Com. B.
897; Ilallctt v. Dowdell, 18 Q. B. 2, 43, 53.

126

Chap. II] EFFECT OF NOTICE [§ 30

violates its essential nature must sometimes be rejected
by the courts. For instance, if any individual or part-
nership should stipulate in his or its pecuniary obliga-
tions that he or it should not be personally liable
thereon, without at the same time mortgaging or pledg-
ing property or giving some other specific lien for secur-
ity, it might be difficult for the law to regard the stipu-
lation, because in that event as there would be no lien
that the law could enforce, the holder of the obliga-
tion would be left without remedy unless he could pro-
ceed by judgment against the obligor; and the result,
if sustained, would be an obligation which in law is no
obligation. The present case, however, assimilates it-
self to the large class of cases where certain property
being pledged in some form for the security of a debt,
the parties have been at liberty to stipulate that the
owner of the debt should look only to the property
thus pledged. In the present case not only did the
bank of Topeka have specified assets given it for its
security but the entire property of the association was
held in trust and therefore subject to administration
by the chancery courts, which could apply it equitably
and proportionally to the discharge of obligations in-
curred by the trustee as contemplated by the express
direction of the articles of association that the debtors
of the trust should look for payment solely to its
property." Hence individual shareholders were held
not liable.'^ In another case in the Federal Court

^ Bank of Topeka v. Eaton, 100 Fed. 8 (C. C. — Mass.), aff'd
by C. C. A. 107 Fed. 1003; ace. Hotchin v. Kent, 8 Mich. 526,
528; Industrial Co. v. Texas, 31 Tex. Civ. App. 375. But see Danforth
V. AUen, 8 Met. 334, 342. It has been held where there was reference
in an oral contract made by an agent of an unincorporated association
to the articles of association which contained such a hmitation of lia-
bility, that a plaintiff could not sue a member on the express con-
tract because the agent had limited authority only, but that he

127

§ 30] ASSOCIATIONS FOR PROFIT [Chap. II

there is a dictum in favor of the enforceability of such
provisions.^

If we accept the doctrine that mere notice of hmita-
tion of habihty is sufficient, the question arises, what
kind of notice? In one case it was said that notice by
pubUcation was sufficient.^ From the tenor of the other
decisions and the hostility of many courts to the whole
principle, it seems likely that this case would not now
be followed anywhere. Recording the deed of trust in
the registry of deeds would be notice only to those deal-
ing with the real estate. The statutory requhement in
Massachusetts of filing a copy of the deed of trust with
the town clerk and commissioner of corporations is not

could sue on a quantum meruit either the agent or the members of
the association individually. SuUivan v. CampbeU, 2 HaU (N. Y.) 271,
276.

A member of a clearing house (unincorporated association) acted as
agent for another bank in clearing checks under rules of association
which provided that the arrangement should not be discontinued with-
out previous notice which should not take effect until the exchanges
of the morning following the receipt of such notice. The principal
failed and the agent bank gave notice and applied securities it held in
reimbursement of checks cleared the next morning. The receiver of
the failed bank claimed these securities and said the rule was invahd
because it resulted in an unlawful preference. Held: Banks had a
right to form this association and be bound by rules which expressed
the contract between them. Such agreements must be enforced if not
in conflict with rules of law. There was nothing objectionable in the
agreement. The agency created a three party contract between the
two banks and the association. O'Brien v. Grant, 146 N. Y. 163, 173,
40 N. E. 871.

8 A judgment was obtained against agents of an association per-
sonally for work done for this association. They were also share-
holders. They contended they could not be held because of provisions
in the articles of a.s30ciation that every person dealing with them "dis-
avows having recourse on any pretence whatever to the person or
separat(! property of any present or future member of the company."
Held: At most only a contract not to enforce his judgment against them
pcTsonally. If he attt^mpted to break it, equity might grant an injunc-
tion. Davis V. Beverly, 2 Cranch, C. C. 35.

• Bill in «!(juity to (jnforce notes of a banking association whose
articles .stipulated that only the funds of the bank should be liable.
These arti;;lcH had })een pui)lislied and a cojjy was annexed to the bill.
Held: That by reason of publication the plaintilf must be presumed to

128

Chap. II] EXPRESS STIPULATION [§ 31

thereby made notice to any one.^° It has been said,
in the case of what was really not a partnership but a
non-profit association, that the nature of the associa-
tion may give notice of limitation of liability of mem-
bers.^^ The same statement has been made as to mining
partnerships.^- The time may come when the custom of
limiting liability of members of these unincorporated
associations is so familiar that courts which accept the
doctrine of limitation of liability by notice will find
constructive notice from mere knowledge by the cred-
itor that he was dealing with an association for profit.

§ 31. Express Stipulation in Contracts with Third
Parties

It is evident, however, from the form of limitation
now favored that reliance is not placed on the doctrine
of notice alone. It is intended to incorporate the aban-
donment by the creditor of his common law rights in
an express contract. The tendency of the decisions is
to uphold this if sufficiently clear; and this, it is sub-
mitted, is the correct principle. Of course, one contract-
ing with trustees of such an association may expressly
agree that he will not hold the trustees to personal lia-
bility. In that case he cannot sue the trustees at all at

have known of the provision when he bought his notes. Hence he can
have rehef in equity against the funds in the hands of the trustees but
not against the shareholders beyond the subscriptions as called for. A
decree was later entered, the reason for which is not clear, and the
case was later reversed in 2 Pet. 482 on questions of procedure. Riggs
V. Swann, Fed. Cas. 11831.

1" Acts of 1909, ch. 441, as amended by Acts of 1913, ch. 454. See
also Acts of 1913, ch. 596.

" Volger V. Ray, 131 Mass. 439.

12 Skilhnan v. Lachman, 23 Cal. 198, 206. But it would seem that
this case and others like it are due to a misunderstanding of the Eng-
lish cases which held merely that because it was not a trading partner-
ship its agents had no authority to bind it by negotiable instruments.
See § 22, note 3.

129

§ 31] ASSOCIATIONS FOR PROFIT [Chap. II

law.^ It has been hinted that the beneficiaries might
be hable in equity as principals.^ If the contract ex-
pressly provided, however, that no action could be
brought against any one, but the only remedy of the
contractor was to reach the trust fund, it is doubtful if
such provision would be held binding.^

There is an early decision in Pennsylvania which
accepted with reluctance the right to forestall individual
liability by contract. Notes were issued by an unin-
corporated banking association containing the stipula-
tion that they were payable ''out of their joint funds,
according to the articles of association." Gibson, J,,
said: "1 see no reason to doubt, but they may limit
their responsibility by an explicit stipulation made with
the party with whom they contract and clearly under-
stood by him at the time. But this is a stipulation so
unreasonable on the part of the partnership and afford-
ing such facility for the commission of fraud, that un-
less it appears unequivocally plain from the terms of
the contract, I will never suppose it to have been in
the view of the parties." He therefore held the mem-
bers liable.*

1 Shoe & Leather Nat. Bank v. Dix, 123 Mass. 148, 151; Glenn v.
Allison, 58 Md. 527 (agreement implied from reference in a mortgage
to the deed of trust).

2 Hussey v. Arnold, 185 Mass. 202, 204, 70 N. E. 87. But see Taylor
V. Davis, 110 U. S. 330, 28 L. cd. 163, 4 S. Ct. 147.

3 Hibbs V. Brown, 190 N. Y. 167, 186, 196, 82 N. E. 1108.

* Hess V. Werts, 4 Serj. & R. 356, 361. Ace. Witmer v. Schlatter,
2 Rawle 359.

Action on certificate of deposit issued by an unincorporated savings
association. The plaintiff had been a member fourteen years before.
Its articles stipulat(!d that no contract could be made on its behalf
unl<!KH it contained a stipulation against personal liability of members.
No such Htij)nIation was inserted in these; certificates. Held: Sucli
Htij)ulations must b(! siiown by the defendant to have been made part
of I lie contract to be enforc(;:ible. "In all partnershii)s it is competent
for any one d(!aling witii tii<; firm to contract not, to hold the partners
liable to an unlimited extent, but the onus probandi is on the iirm and

130

Chap. II] EXPRESS STIPULATION [§31

In a New York case relating to a statutory joint stock
association the majority of the judges seem to have
felt that such a provision was void as against public
policy.^

The English courts, however, uphold such contracts.^
They say that the individuals who sign the contract
personally contract that the capital stock or funds of
the company shall be applied to answer the claim on the

if they fail in establishing their case the general rule of unlimited lia-
bihty appUes to them as a matter of course." Beaver's Adm. v. Mc-
Grath, 50 Pa. St. 479, 486, 488.

"This company (insurance underwriters) or association was not
incorporated and was in no wise exempted by law from partnership
habiUty, except as it should by agreement with the insured actually
and expUcitly so exempt itself. This does not mean that seemingly
constructive notice which is so contrived and intended as to be hidden
in the letter and not to be perceived or suggested until searched out
of its lurking place after a loss. It means a notice so plain and fair
that the party to be charged with it either receives it or it is his own
fault if he does not." Imperial Shale Brick Co. v. Jewett, 169 N. Y.
143, 150, 62 N. E. 167.

^ A statutory joint stock company of New York, the Adams Ex-
press Company, issued bonds stipulating against personal habihty of
members and making them payable only out of the funds of the com-
pany. The issue was whether the provision Umiting payment to the
fund made them non-negotiable. Held: It did not. O'Brien on the
ground that they were practically corporations by statute. Werner,
Bartlett and Cullen on the ground that the hmitation of habihty was
against pubhc pohcy and void. "Personal habihty preserved by the
legislature and recognized by the courts." O'Brien intimated that if it
were an ordinary partnership he might agree on that. Hibbs v. Brown,
190 N. Y. 167, 82 N. E. 1108.

But see Warner v. Beers, 23 Wend. 102, 151, 152, apparently contra.
(This case contains a long discussion of the early associations in Eng-
land and New York.)

8 A contract of insurance stipulated that "the said pohcy or anything
therein contained shall in no case extend or be deemed or construed to
extend to charge or render liable the respective proprietors of the said
company or any of them," etc., "to any claim or demand whatsoever
in respect of the said pohcy or of the assurance thereby made beyond
the amount of their, his or her individual shares or share in the capital
stock of the said company, but that the capital stock and funds of the
said company shall alone be charged and hable to answer all claims
and demands by virtue of the said assurance or incident thereto."
Held: To preclude any action at law against an individual shareholder.
Halket v. Merchants, etc. Ass'n, 13 Q. B. 960; Hallett v. Dowdell,
18 Q. B. 2, 43, 54; Athenaeum Life Assurance Society, 4 H. & J. 517.

131

§ 32] ASSOCIATIONS FOR PROFIT [Chap. II

contract. It is also held that each shareholder may be
sued and recovered against to the extent of his unpaid
subscriptions." They hold he is also liable if the fund
to which habihty is hmited is non-existent by his own
fault. «

Interesting questions will arise in the administration
of assets between creditors who are bound by contract
to this limitation of liability and general creditors not
bound by that stipulation. It has been held that
holders of insurance policies containing such clauses
were not partners, but should share equally with gen-
eral creditors.^ It has also been held that the cred-
itors who were limited to the nominal capital of the as-
sociation had no equity of marshalling against general
creditors who ma^' hold the individual shareholders.^"
A member who pays a debt of the association is entitled
to contribution.^^

§ 32. Remedies of Creditors

A contract to pay out of specific funds does not create
a charge on those funds/ but even before time of pay-

^ Hallett V. Dowdell, 18 Q. B. 2, 43, 55; Merchant Traders' Ass'n,
5 De G. & Sm. 386.

An action on an insurance policy containing such a Umitation to
recover the amount of a shareholder's unpaid subscription was held
properly brought against the shareholder and not against the directors
who executed the policy. Reid v. Allan, 4 Ex. 326.

8 Mclntyre v. Belcher, 14 C. B. N. S. 654.

' English, etc. Assurance Society, 1 H. & M. 85.

They have no charge on the assets giving them any priority over
general creditors. State Fire Ins. Co., 1 II. & M. 457.

'0 The Profes.sional Life Assurance Co., L. R. 3 Eq. 668. See State
Fire Ins. Co., .34 L. J. Ch. 436.

» Phillips V. Bl.it ciiford, 137 Mass. 510; Tabcr v. Breck, 192 Mass.
3.55, .361, 365, 78 N. E. 472; Comm. v. Rosen, 176 Mass. 129, 130, 57
N. E. 223; I':ngvall v. Buchie, 73 Wash. 534, 132 Pac. 231. See § 24,
note 16, and § 28, note 8.

» Sovereign Life Assurance Co. (1892), 3 Ch. 279; Albert Life Assur-

i:i2

Chap. II] TRUSTEES OF ASSOCIATIONS ' [§33

ment, the creditor may prevent the fund from being
misapphed.^ This does not amount, however, to an im-
phed contract to continue to carry on the business.^
It will be practically impossible to sue at law on such
contracts. The remedy will be in equity.'* The fact
that the trust deed provides that the trustees shall be
free from personal liability does not prevent them from
contracting personally with a creditor of the associa-
tion if they see fit.^

§ 33. Trustees of Associations for Profit

The relations between the trustees of associations for
profit and the shareholders are determined by the rules
ordinarily applicable to the relation of trustee and bene-
ficiary. A shareholder may file a bill in equity against
the trustee to compel performance of the trust. ^ But
an assignee of all the shareholders and of the interest
of one of the trustees cannot bring a writ of entry to

ance Co., 9 Eq. 706; Industrial Co. v. Texas Ass'n, 31 Tex. Civ. App.
375, 380, 72 S. W. 875.

2 Kearns v. Leaf, 1 Hem. & M. 681; State Fire Ins. Co., 1 De G. J.
& Sm. 634.

3 King V. Accumulative Co., 3 C. B. N. S. 151.

* Hallett V. Dowdell, 18 Q. B. 2. See Grain's Case, 1 Ch. D. 315,
322.

* A jury could find that the trustees authorized or ratified a bor-
rowing by their agent on their personal credit. American Co. v. Con-
verse, 175 Mass. 449, 451, 56 N. E. 594.

1 Mann v. Butler, 2 Barb. Ch. 362, 367; Chapin v. First Universalist
Society, 8 Gray 580, 583.

Shareholders in an unincorporated association to speculate in land,
title to which was taken in name of defendant, bring bill for dissolu-
tion of the association, winding up and establishment of trust. Held:
Statute of Limitations did not begin to run till after an open repudia-
tion of the trust. Barker v. White, 58 N. Y. 204, 213.

A bill by beneficiaries of an association for an accounting against
the trustee and manager was not multifarious. He occupied a fidu-
ciary relation towards the complainants in both capacities and his
breaches of trust relate to the same subject matter. Moody v. Flagg,
125 Fed. 819 (C. C. — Mass.).

133

§ 33] ASSOCIATIONS FOR PROFIT [Chap. II

recover possession of a building the association has
erected. 2 A trustee cannot make a secret profit at the
expense of the shareholders.^ Conference of all the

2 Chapin v. First Universalist Society, 8 Gray 580, 583.

Land was conveyed to trustees for development to pay off a mort-
gage and then turn over to the directors of an association. The trust
deed and articles of association were different instruments, but the
latter was incorporated by reference in the former. Held: Directors
of the association had no power to dedicate part of the land to the
pubhc without an act by the trustees. Ward v. Davis, 3 Sandf. 502,
514.

^ A blind pool syndicate for dealing in mining shares through a
manager on money borrowed on guarantee of individual members.
Plaintiff was member of pool and claimed secret profits because manager
dealt with other syndicates in which he was interested and also bought
and sold directly to the syndicate. Held: Latter improper, but the
amount lost was less than what plaintiff owed the syndicate. The
deaUngs with other syndicates were not beyond the scope of the au-
thority of the manager having in view "the nature of the enterprise
in which the appellant was concerned and the knowledge which must
be imputed to him and his co-adventurers." Laughton v. Griffin
(1895), A. C. 104, 112.

Syndicate was formed to speculate in a certain stock. It provided
that the managers should not be interested in purchases individually.
The subscribers were called on to take their shares. After plaintiff
had taken his and settled with the managers, he brought this bill to
reopen the whole settlement with self and associates, alleging that the
managers had bought some of the stock for themselves and had made
subscribers take it. Held: Plaintiff's right is against the managers
alone and does not depend on the plaintiff's ignorance of the general
partnership account. Plaintiff cannot reopen the settlement with his
associates. Plaintiff may have action against the managers for damages
for breach of contract. Strong dissent that must reopen whole ac-
counting. Boody V. Drew, 2 Thomps. & C. (N. Y.) 69, 72.

One who organized a syndicate to speculate in land and held title
as trustee and was also a shareholder must account for a secret profit
made in turning over land to syndicate. Court put it on ground of
agency, saying he was not exactly a trustee. Ferguson v. Bateman,
1 App. D. C. 279, 290.

Agent of land sjmdicate who held one share cannot make a secret
profit out of the syndicate by selling them land he bought cheaper
than their authorized jirice. Lyon v. Worcester, 49 111. App. 639, 650.

Minority sluirehoiders in an association organized under a deed of
trust may bring a ImII for an acxiounting against the trustee who is
allegefl to have acquired sliares wliicli have been forfeited to the asso-
ciation making a majority and to have transferred the trust funds to a
coq)oralion which he controls. Booth v. Dodge, 69 N. Y. S. 673, 60
App. Div. 23.

A cooperative store association made an arrangement for a contribu-

134

Chap. II] TRUSTEES OF ASSOCIATIONS [§ 33

trustees is not necessary to action. Being merely min-
isterial officers one might delegate his authority to the
others.* Even when it is expressly provided that a
majority may decide, all must have notice or an oppor-
tunity to be heard.^ Notice to one trustee is notice to
all and is not affected by the resignation of the original
trustees and substitution of new ones.^ They are not
liable for honest mistakes of judgment,^ but may be
held responsible for negligence.^ It has been decided
that when trustees were held on an accounting respon-

tion of capital by the son of its general manager for which a certificate
for shares was issued. Later the manager mortgaged all the goods of
the store to the son to secure this, claiming it had been a loan. Held:
It was a contribution of capital and not a loan and there was no debt
as consideration for the mortgage. Hence the manager must account
for the goods in a suit by other shareholders (p. 622). Declared to be
a partnership (p. 618). Snyder v. Lindsey, 157 N. Y. 616, 52 N. E.
592.

Promoters must make full disclosure to syndicate members. Arnold
V. Searing, 78 N. J. Eq. 146, 78 Atl. 762. Re John A. Fry, 4 Phila. 129.
But there is no objection if full disclosure is made. McKinley v. Irvine,
13 Ala. 681.

An unincorporated company with transferable shares to work a
gold mine was organized by a declaration of trust by the owner. The
trustee was asked by a shareholder to sell his share. He bought it him-
self with the knowledge and consent of the shareholder and paid assess-
ment on it. Later a rich strike was made. Held: If sale was in good
faith it was valid and trustee cannot be compelled to account for sub-
sequent increase in value. Swan v. Davenport, 119 la. 46, 96 N. W.
65.

* Wells V. Gates, 18 Barb. (N. Y.) 554, 556.
5 Heard v. March, 66 Mass. 580, 584.

* And a purchaser of shares was not in the position of a purchaser
for value without notice of a constructive trust in the lands included
in the express trust when the trustees were chargeable with notice.
Bisbee v. MacKaye, 215 Mass. 21, 25, 102 N. E. 327 (partnership real
estate trust).

^ Directors of a banking association are not hable to stockholders
for mistakes of judgment honestly made where they acted without
compensation and exercised their best skill and judgment. Addams's
Appeal, 15 W. N. Cas. 230 (Pa.).

* Trustees of an unincorporated savings bank were held liable for
negligence in entrusting its funds to a banking firm that had gone into
the stock brokerage business and later became insolvent. For over
two years they paid no attention to the business. Hoknes v. McDonald,
226 lU. 169, 80 N. E. 714.

135

§ 33] ASSOCL\TIOXS FOR PROFIT [Chap. II

sible for losses due to their negligence, they should bear
it equally and not in proportion to their share hold-
ings,^ ^Managers who are not shareholders are hable
for the debts of the association only in case of exceed-
ing authority or fraud.^" Trustees have no imphed
power to add to the capital of the association by bor-
rowing money, ^^ and for an obligation incurred per-
sonally for such a purpose they have no right of indem-
nity against the other shareholders.^-

Some curious decisions in relation to such trustees
seem inconsistent with elementary principles of trusts.
It has been held that the remedy for negligence of syn-
dicate managers of what appears to have been an asso-
ciation for profit in extending a loan was an action for
breach of contract at law and not an accounting in
equity. ^^ It has also been held that shareholders can-
not bring a cross bill for exoneration against the di-

9 Coit V. Tracy, 9 Conn. 1.5, 21.

A defect in a chain of title was claimed to exist because it passed
through certain trustees of land for a development association and the
consent of the latter to the conveyance did not appear. Held: The
trustees wiU be presumed to have been also members of the association
and so beneficially interested. Hence the New York statute vesting
title in the beneficiaries did not apply. Hence the trustees had au-
thority to convev good title. King v. Townshend, 141 X. Y. 358, 364,
36 X. E. 513.

1" Greenup v. Barbee's Exec, 1 Bibb. 320 (Ky.).

A bill for an accounting was brought by shareholders against the
trustees to charge them for losses in managing a hotel alleged to be out-
side the scope of the purposes of the association. Quimby v. Tap ley,
202 Mass. 601, 89 X. E. 167.

»i Burmestcr v. Xorris, 6 Ex. 796; Ricketts v. Bennett, 4 C. B. 688;
Hawtayne v. Bourne, 7 M. & W. 595; Hawken t'. Bourne, 8 M. & W.
703.

« Re Worcester Company, 3 De G. M. & G. ISO; Ex parte Chip-
pendale, 4 De G. M. & G. 43; Austrahan Co. v. Mounsey, 4 K. & J.
733. For cases on the right of indemnity of trustees, see § 43, notes 12
et seq., § 44, note 23, and § 64, notes 2 and 3.

" This case is perhaps explained on the theor>' that the members of
the 8>Tidicatc were independent contractors and not partners. The
point was not discussed. Paton v. Clark, 156 Pa. 49, 53, 27 Atl.
116.

136

Chap. II] TRUSTEES OF ASSOCIATIONS [§ 33

rectors, who were also defendants in the original suit,
for negligence in incurring a debt on the ground that
the relation of principal and surety did not exist be-
tween them.^^ Where the trustees of an association
converted its property they were held liable in tort at
law.^^

Since liability for torts is joint and several in equity
as at law beneficiaries may bring a bill in equity for an
accounting for wrongdoing by the trustees though all
are not within the jurisdiction, but if the purpose is to
enjoin contemplated action by some of the trustees
looking to the dissolution or winding up of the associa-
tion, it is necessary that all trustees be within the juris-
diction and be made parties, otherwise there might be
conflicting decisions in different jurisdictions as to the
action contemplated.^*^ The provisions for selection of
new trustees to fill vacancies must be strictly complied
with. Thus where the deed of trust, empowering the
remaining trustees to appoint the new trustee, pro-
vided that they express their choice by executing a
formal certificate to that effect, a mere vote without
such a certificate was held not to entitle the person
elected to bring a bill for an injunction against the re-
maining trustees to certify their selection. ^^ Trustees
have power to issue shares as provided in the deed of
trust even after the land which was the original capital
of the enterprise has been sold.^^

" Manning v. Gasharie, 27 Ind. 399.

16 ''Wlien trustees commit any act not inseparable from their lia-
bilities as such they are amenable like other individuals in an action
of tort." Dennis v. Kennedy, 19 Barb. 517, 526.

i« American Cotton Oil Trust. Wall v. Thomas, 41 Fed. 620 (C. C.
— N. Y.).

" McFaddin v. Wiess, 168 S. W. 486, 490 (Tex.).

18 Yeaman v. Galveston City Co., 167 S. W. 710, 720 (Tex.)

137

§ 34] ASSOCIATIONS FOR PROFIT [Chap. II

§ 34. Propriety of Investment by Trustees in Shares in
Associations for Profit

A question has been raised as to the propriety of in-
vestments by trustees in securities of unincorporated
associations. In the case of Smith v. Smith the Massa-
chusetts Supreme Court held that shares in the Mas-
sachusetts Electric Companies, an unincorporated as-
sociation holding bonds and stocks of street railways
of eastern Massachusetts outside of Boston, was an
improper investment for trustees.^ If these associa-
tions are partnerships the ground for the decision is
obvious. The danger to partners does not arise dur-
ing comfortable business times. It comes with financial
failures due usually to the carelessness or dishonesty of
representatives. The distinguished gentlemen now act-
ing as trustees doubtless may safely be trusted even to
delegate wisely their authority necessarily involved in
the management of these large interests. But can the
shareholders be sure that their successors in the trust
will be equally trustworthy? As yet these trusts are
held by individuals and not by trust companies, just
as the early railroad trust mortgages were held by indi-
vidual financiers. It may be that this business will be
transferred ultimately to the trust companies, although

1 After the opinion in this case was handed down and printed in an
unofficial pubhcation called the Banker & Tradesman, of June 27, 1908,
counsel (tailed the attention of the court to an error in the proceedings
below which it was claimed should have deprived the court of jurisdic-
tion. The opinion was thereupon withdrawn and the case recommitted
to tlie lower court, wh(!r(! it was immediately settled. The case was not
dficidwi on the ground that it was a i)artner8hip. Indeed, it may still
])(' lliat the court will follow Smith v. Anderson, supra, as to these
holding trusts. In a later decision the court said, "the ])ropriety of
th«! investment of trust funds in sccHU'ities of this character is not pre-
H(!nted by tjie amendc^d record and this (juestion is postponed for de-
cision until it ])roi)erly arises." Gardiner v. Gardiner, 212 Mass. 508,
'M N. 10. 171.

138

Chap. II] GOVERNMENTAL CONTROL [§ 35

they are now hardly equipped to manage directly in-
dustrial enterprises. The risks to shareholders are even
more obvious in the trusts whose assets consist of stocks
and bonds of public service corporations on which
other bonds are often issued. The assurance of a trust
estate sufficient to meet obligations is less likely than
in the case of real estate. It seems likely, however, that
the law as to liabilities of shareholders in these organi-
zations will soon be settled by decisions and it is to be
hoped that the courts will take a broad view of the
questions so that securities issued by unincorporated
associations will be able to compete with those of
corporations. If the organization which issued the
shares is not a partnership but a trust, there can be no
impropriety in the purchase of them by trustees.

§ 35. Governmental Control over Associations for Profit

The cause of the recent development of these associ-
ations is doubtless the desire to escape troublesome
statutes regulating corporations which interfere with
plans for combination and stock watering, the un-
pleasant certainty of taxation and the publicity of
returns. Is there any immunity from regulation in
these associations which derive no franchise from the
State?

It was originally supposed that Eliot v. Freeman ^
decided that real estate trusts could not constitutionally
be taxed, but the court simply said that the original
Federal Corporation Tax as written did not include
them. It is to be noted, however, that the justifica-
tion of the constitutionality of the Federal Corpora-
tion Tax was put on the ground that it was a tax on a

1 220 U. S. 178, 197, 55 L. ed. 424, 31 S. Ct. 360.
139

§ 35] ASSOCL\TIOXS FOR PROFIT [Ch.u'. II

prhilege conferred by the State or Federal Government,
and the real estate trusts were said to have no such
prhilege.

The amendment to the Interstate Commerce Act
authorizing regulation of rates provided that "the
term common carrier as used in this act shall include
express companies.'' It was held by the United States
Supreme Court that this included the great express
companies though they are partnerships. Judge
Hohnes said: ''The power of Congress is hardly de-
nied. The constitutionaHty of the statute as against
corporations is estabhshed and no reason is suggested
why Congress has not equal power to charge the part-
nership assets with a habihty and to personifj^ the com-
pany so far as to collect a fine by a proceeding against
it in the company name." The court, however, refers
to the Xew York cases to show the ''semi-corporate
standing of these companies.'' -

Except for the filing statute above noted. Massa-
chusetts has not yet attempted to regulate these asso-
ciations. The EngUsh Companies Act now pro^'ides
that the number of an unincorporated partnership shall
not exceed twenty numbers.^

The Federal Income Tax of 1913 expressly includes
associations with corporations as subject to the tax. It
also makes special provision for taxing partnerships.
It seems Ukely, therefore, that the next important de-
cision on the nature of these associations will occur in
litigation arising under this statute.

There has been no decision directly passing upon the
right to regulate unincorporated associations as dis-

» United States v. Adams Express Co., 229 U. S. 381, 390, 57 L. ed.
1237, 33 S. Ct. 878.

» 8Edw. VII.c. G9, § 1.

140

Chap. II] GOVERNMENTAL CONTROL [§ 35

tinguished from all other partnerships. Regulations
discriminating between corporations on the one hand
and unincorporated associations and individuals on
the other raise a somewhat similar problem but one
much easier of solution, since corporations having a
franchise from the State are clearly subject to regula-
tion. The principle involved in the two cases must be
the same, however, though its application will be differ-
ent. When the restrictions placed upon corporations
are less than those upon associations or individuals,
that is, when the design is to restrict a business to cor-
porations, the analogy becomes closer. Of such a case
Judge McLain said: ''The question is as to the right
to discriminate between classes by way of regulation of
the business," (unincorporated associations, partner-
ships and individuals on the one hand and corpora-
tions on the other). "That such discrimination may
be made when based on a reasonable distinction involv-
ing the public welfare cannot be questioned; and if the
distinction between classes is reasonable and not purely
artificial and the statute is applicable to all who come
within the limits of the classification, its constitution-
ality cannot be questioned." ^ It has been held that
shares in such associations cannot be taxed to the
owner. ^ But that the association, like other partner-
ships, must be assessed in the town of its principal
place of business.^ The distinction made between shares
in corporations and shares in associations was that
whereas the former were property under Massachusetts

* Restrictions on unincorporated building and loan associations
greater than those on corporations held constitutional. Brady v.
Mattern, 125 la. 158, 163, 100 N. W. 358.

* Hoadley v. County Commissioners, 105 Mass. 519, 526.

6 Ricker v. American Loan & Trust Co., 140 Mass. 346, 349, 5 N. E.
284; Wilhams v. Boston, 208 Mass. 497, 94 N. E. 808.

141

§ 35] ASSOCIATIONS FOR PROFIT [Chap. II

decisions, the latter simply represented an undivided
partnership interest in the net assets of the associa-
tion which was otherwise taxed. '^

On the other hand, it has been held recently that
shares in real estate trusts are not choses in action but
a substantial property right and are subject to the suc-
cession tax like shares in domestic corporations.^

It has been held that the Massachusetts corporate
franchise tax, an excise on the corporation based on
the excess in market value of its aggregate share capital
over the assessed value of its tangible property other-
wise taxed, cannot be extended to associations.^ The
reasons given were that the association did not ask any
special privilege of the legislature and that its peculiar
features were created by agreement of the members
under their natural rights at common law. ''We do
not see how this peculiar feature (transferability of
shares) can be called a commodity, subject to special
excise, any more than the agreement of co-partnership
itself or any clause or part of it or any other agreement,
right or mode of transacting any business can be called
a commodity and so liable to taxation at the will of the
legislature." The true meaning of this decision has
been the subject of discussion in subsequent decisions.^"

^ Hoadley v. County Commissioners, 105 Mass. 519, 526.

8 Peabody v. Treasurer, 215 Mass. 129, 102 N. E. 435. See § 21.

Shares in a joint stock association of New York owned by a de-
ceased resident in New York arc personal property and taxed at full
value though part of the assets of the association was real estate, which
if it had descended to tlie heirs of the deceased would have been exempt.
Re Jones, 172 N. Y. 575, 65 N. E. 570.

Shares in a New York joint stock association owned by a resident
of Nc;w Jersey are liable to a transfer tax on his decease on the propor-
tion of their value which the property within the State bore to the en-
tire property of the association. Re Wilbner's Estate, 138 N. Y. S.
049, 153 App. Div. S04.

» (ilea.son v. McKay, 134 Mass. 419, 425.

" See Minot v. Winthrop, 162 Mass. 113, 38 N. E. 512.

142

Chap. II] GOVERNMENTAL CONTROL [§ 35

Not long since the legislature of Massachusetts ex-
ercised its constitutional right and asked the opinion
of the justices on the constitutionality of a stock trans-
fer tax including a tax on shares in unincorporated as-
sociations. The judges differed in opinion, a majority
holding such a tax valid — three on the ground that an
excise in Massachusetts can be levied on a privilege
which is the exercise of a natural right. Four judges
denied this, and three held that transferability of shares
in a partnership is an immaterial distinction from other
partnerships and cannot be a basis for classification,
but one (now the Chief Justice) held that transferability
of such shares was not a natural right because a business
dependent on such elaborate provisions which require
constant resort to the courts for their enforcement may
be regulated by the legislature, but he did think that
an excise on the existence of such an association or on
the holding of property by it would be unconstitutional.
It is not entirely clear whether or not the justices
thought that doing business in the form of a partner-
ship is taxable provided that the excise applies to all
partnerships.^^ The legislature of Massachusetts, how-
ever, in enacting the stock transfer tax of 1914 included
a section making it applicable to transfers of shares in
voluntary associations organized under a written in-
strument or declaration of trust the beneficial interest
in which is divided into transferable shares. ^^ An
authoritative decision of the court on the constitu-
tionality of this section of the law will doubtless soon be
rendered.

11 Opinion of the Justices, 196 Mass. 601, 615, 620, 626, 85 N. E.
545.

12 Acts of 1914, ch. 770, § 10, as amended by Acts of 1915, ch. 238,
§5.

143

§ 36] ASSOCIATIONS FOR PROFIT [Chap. II

§ 36. The Uniform Partnership Act

No discussion of the subject of this chapter would
be complete without consideration of the effect on it
of the codification of the law of partnership which was
adopted in 1914 by the Conference of Commissioners
on Uniform State Laws. This Code will doubtless be
enacted into law in some of the States before this book
goes to press. It makes some changes in the law of
partnership and makes certain many things that were
before in confusion. As the result of twelve years' dis-
cussion among the Commissioners and their expert
advisers it is doubtless the best practical solution of a
perplexing problem and without regard to its fundamen-
tal soundness ^ will be welcomed for its promise of defi-

1 In no department of the law has controversy been keener than
between the advocates of the so-called "entity theory" of partnership
and the advocates of the so-called "common law" theory. The sup-
porters of the latter have regarded themselves as paladins of a cherished
principle handed down from a golden age of the common law pure and
undefiled and have affixed that worst stigma of the practitioner, "theo-
rist," to those who sought to make consistently visible throughout the
framework of the subject the basic logic which the instinct of mer-
chants has always applied to the practical aspects of this purely mer-
cantile relation. When the commissioners began consideration of this
subject the late Dean Ames was employed to draw an act in accordance
with the mercantile conception of partnership of which he had been
one of the greatest advocates. Later, however, the defenders of the
faith rallied their forces and gradually brought the Conference to adopt
formally the other theory. Attempts to make such a code logically
consistent then resulted in several drafts which have culminated in
on(! which is in itself a conclusive confirmation of the soundness of the
mercantile view. It has often been noted that those jurisdictions that
were loudest in their approval of the "common law" theory of part-
n(!r.ship were the first to d(ipart from it in reality when wrestling with
Hix'cific jiroblcins. The proposed code, while asserting with emphasis
the fav(jrit(! rule of tlu; supporters of the conunon law theory, viz.,
that th(! partners as indiviihiuls have a projjerty right in the specific
properly of (lie i)artii('rsliip, creates for that property right a new name,
— tenancy in ijarlncrsliii) — and then j)roce(uls by definition to efimi-
natc; from it nil es.scntial incidents of i)roperty rights, leaving in it only
a modified right to poHsession. The otlicr unportant changes in the

144

Chap. II] UNIFORM PARTNERSHIP ACT [§ 36

nite rules instead of conflicting opinions. The Code
defines partnership as ''an association of two or more
persons to carry on as co-owners a business for profit." ^
It makes no distinction between small partnerships and
large associations. On some points already discussed
in this chapter it makes certain the rule towards which
the courts seemed tending, but in the main it will
efiect few changes in the law applicable to what are
herein called unincorporated associations. Since the
problems involved in the modern associations formed
under elaborate deeds of trust arise mainly from express
agreement of the parties defining their relations, the
Code will have no effect on them except where the
plans of their organizers break down.

One of the most important parts of the new Code is
that dealing with real property. Title to firm real
estate may be acquired and conveyed in the partner-
ship name.^ A conveyance in the firm name by any
partner passes the title in such real estate to the gran-
tee, but the firm may recover it, if the partner's act
does not ''bind the partnership," unless the land has
passed to a "holder for value without knowledge that
the partner in making the conveyance has exceeded his
authority."^ "Knowledge" is defined to include
"knowledge of such facts as in the circumstances shows
bad faith." ^ Where title to real property is in the
name of the partnership, a conveyance executed by a
partner, in his own name, passes the equitable interest
of the partnership, provided the act is one within the

law which this code will produce aU tend towards consistency with
the mercantile view of partnership. If the act had emanated from a
legislative committee should we suspect that the radicals had, in the
language of the day, "put one over on" the conservatives?

2 Section 6 of the Act. » Section 8 (3).

* Section 10 (1). * Section 3 (1).

145

§ 36] ASSOCIATIONS FOR PROFIT [Chap. II

authority of the partner ''as previously defined.^
Where title to real property is in the name of one or more
but not all the partners and the record does not disclose
the right of the partnership, the partners in whose name
the title stands may convey title to such property, but
the partnership may recover such property if the part-
ners' act does not bind the partnership" as previously
defined ''unless the purchaser or his assignee is a
holder for value without knowledge." ^ "Where the
title to real property is in the name of one or more or
all the partners, or in a third person in trust for the
partnership, a conveyance executed by a partner in the
partnership name or in his own name, passes the equi-
table interest of the partnership, provided the act is
one within the authority of the partner" as previously
defined.^ "Where the title to real property is in the
names of all the partners a conveyance executed by all
the partners passes all their rights in such property."^
All of these provisions are simply the application of
common sense to a business problem. So far as they
change existing law they are wholly desirable.

The next important change in the present law relates
to changes in the membership of the firm. "A person
admitted as a partner into an existing partnership is
liable for all the obligations of the partnership arising
before his admission as though he had been a partner
when such obligations were incurred except that this
liability shall be satisfied only out of partnership prop-
erty." ^° "A conveyance by a partner of his interest
in the partnership does not of itself dissolve the part-
nership." 1^ "The dissolution of a partnership is the

• Section 10 (2) ^ Section 10 (3).

8 Section 10 (4). » Section 10 (5).

»" Section 17. " Section 27 (1).

146

Chap. II] UNIFORM PARTNERSHIP ACT [§ 36

change in the relation of the partners caused by any
partner ceasing to be associated in the carrying on as
distinguished from the winding up of the business." ^^
"On dissolution the partnership is not terminated, but
continues until the winding up of partnership affairs
is completed." ^^

The effect of dissolution on existing liabilities of the
firm is left unchanged by the Code.^^

The rights of creditors upon a change in the member-
ship of a firm without a liquidation are further treated
in an elaborate series of rules/^ which, without chang-
ing the rule that change of membership is a dissolu-
tion, in substance provide that creditors of the firm as
it was before the change in membership are creditors
of the firm that exists thereafter (the new partners' lia-
bility to be satisfied only out of the partnership prop-
erty) and thereby establish their right to reach the
property employed in the business. Under these rules
a shareholder in a partnership association who sells his
share does not thereby escape liability for debts con-
tracted during his membership unless the courts find
from the nature of the organization that the creditor
impliedly agreed to accept his transferee as debtor in
place of the transferor by way of novation; in the
absence of such agreement the transferee is not person-
ally liable for debts incurred before the transfer, but
creditors may reach directly the property of the asso-
ciation whether their claims accrued before or after the
transfer of shares in question; and transfer of shares
effects a technical dissolution of the partnership. It
is to be expected, however, that courts which have
shown a tendency to classify associations as something

12 Section 29. i^ Section 30.

" Section 36. i^ Section 41.

147

§ 36] ASSOCIATIONS FOR PROFIT [Chap. II

distinct from other partnerships, will hold ultimately
that the natm*e of these organizations is so familiar and
the understanding of business men that their obliga-
tions are to be enforced only against the association
as it exists at the time of enforcement so common that
a novation is implied in every case of transfer of shares.
The creation by the act of a new property right to
be known as tenancy "in partnership" is the only
change in the law as now generally accepted regarding
the natiu-e of a partner's interest in the property of the
firm. While this as previously explained is apparently
a mere change in nomenclature, it will probably over-
rule some decisions that have been much criticised,^^
which, however, are not of especial concern in the kind
of partnership discussed in this chapter.

1^ If the partner is to have theoretically a property right in the
property of the firm in addition to his right to an accounting and pay-
ment of his share in the net assets (which in the Code is described as
his interest in the partnership as distinguished from his interest in
specific partnership property) it is difficult to see how his right to
share in assets unexpectedly reahzed upon by one partner after disso-
lution would be barred by the statute of Umitations which bars en-
forcement of the right to an accounting as in Knox v. Gye, L. R. 5
H. L. C. 656. This is borne out by § 30, which provides that on dis-
solution a partnership continues "until the winding up of partnership
affairs is completed."

148

CHAPTER III

TRUSTS

§ 37. In General

Trusts for large numbers of beneficiaries whose in-
terests may or may not be represented by transferable
certificates are but a natural outgrowth of simple ex-
press trusts and the rules of law applicable to them are
those which have been established with reference to
all other trusts. The possibilities of the instruments
creating such trusts are infinite, because so far there
has been little attempt by legislatures to regulate or
restrict them. The possibility that it may be held that
the rule against perpetuities or the rule against re-
straints upon alienation apply to trusts of the charac-
ter here considered has been fully discussed and it is
usual to avoid this possibility by appropriate limita-
tion upon the duration of the trust. ^ The forms
of trust deeds are, therefore, various and the con-
struction placed upon one is not always helpful in
determining the true meaning of another.- The ones

1 Hart V. Seymour, 147 111. 598, 35 N. E. 246; Howe v. Morse, 174
Mass. 491, 503, 55 N. E. 213 (these were trusts for associations for
profit, but the same principle must apply to pure trusts). Gray, Per-
petuities, 3d ed., § 509. See § 11.

^ A trust deed was acknowledged, delivered and accepted by the
trustees in New York where the gi'antor then resided. The trust estate
was stock in corporations organized in four different States. No place
of performance was designated. Held: The instrument is to be con-
strued by the law of New York without reference to the residence of the
trustees or the later residence of the grantor. Mercer v. Buchanan,
132 Fed. 501 (C. C — Pa.).

A holding trust deed was interpreted to confer on the trustees the

149

§ 37] TRUSTS [Chap. Ill

more conunonly used in modern business, however,
fall into a few well-recognized classes, each having
certain characteristics.

There are still other business relations which should
properly be classified as trusts, but which have not
yet been so defined by the courts. The relation between
underwTiters of securities and the managers of the
sjTidicate, for example, has usually been deemed that
of principal and agent. In underwriting agreements as
formerly drawn this was probably the correct conclu-
sion and the cases are therefore considered with other
" unassociated groups" in Chapter IV. ^ The members
of these syndicates, however, do not contemplate in-
curring the liability of a principal for acts of their man-
agers, nor do they need to exercise the control over their
managers that a principal has over his agent. In the
more recent underwriting agreements the transaction
really takes the form of a trust in which the manager
holds the funds, or rather the obligations of the sub-
scribers to furnish funds, as trustee for them and con-
tracts for their benefit, but as a principal holding legal
title and not as an agent.'*

There have been occasional instances in the reports
of trusts under wills empowering the trustee to con-
tinue the testator's share in a partnership for the
benefit of certain beneficiaries. These cases are cited as
authorities in cases involving the more formal trusts
for numerous beneficiaries.^

power to sell stock as well as buy it. Not accountable if act in good
faith, (iould V. Mead, 41 Fed. 240 (C. C. — Col.).

3 See §§8 and 50.

* Jones V. Gould, 209 N. Y. 419, 424, 426, 103 N. E. 720. See § 53,
note 3.

' IJurwell V. Mandeville's Exec, 2 How. 560; Ex -parte Garland, 19
Yes. 110; Ex parte. Ilicliardson, 3 Mad. Ch. 79; Re Johnson, 15 Ch. D.
548.

150

Chap. Ill] TRUSTS FOR CREDITORS [§ 38

The distinction between partnership associations and
pure trusts has already been discussed at length.*^ It
is sufficient here to say that the essential elements of a
partnership which are lacking in pure trusts are the
element of association and the right on the part of the
beneficiaries to direct and control the management of
the funds by the trustees. The cases involving trusts
organized for the purpose of conducting a business or
for the purpose of holding securities or property as an
investment for numerous beneficiaries whose interests
are represented by transferable shares, so far as they
relate to the nature of the organization are not repeated
here.

§ 38. Trusts for Creditors

An instance of trusts of this sort is that created by
an assignment for the benefit of creditors. It frequently
happens that the assignees are empowered to run a
business and apply its profits to the liquidation of the
claims of creditors. Even where the deed of assignment
purports to give the assignee this power to continue
the business he should, for his own protection, obtain
the consent of creditors ^ or he may be held personally
liable for losses. Such assent may be found from execu-
tion of a deed of assignment containing such a provision.
In some cases the agreement for this purpose which is
signed by the creditors creates what is really a partner-
ship,^ but in most instances it will be found that the

6 See § 9.

1 Hill V. Cornwall, 95 Ky. 526; Cooper v. Lankford, 117 Ky. 792, 78
S. W. 197; Wilhelm v. Byles, 60 Mich. 561, 567, 27 N. W. 847; Quimby
V. Uhl, 130 Mich. 198, 211, 89 N. W. 722; Brown's Estate, 193 Pa. St.
281, 44 Atl. 443.

2 Creditors of an insolvent business had it transferred to trustees who
carried it on for their benefit to pay off their claims and then turn it over

151

§ 39] TRUSTS [Chap. Ill

creditors are simply beneficiaries acting as individuals
and not really as a group or association. ''The profits
which the trustee applies to their claims are the debtors'
profits, not theirs. They are not the proprietors of the
business. They have not the right to direct and con-
trol the acts of the trustee as a principal would an agent.
The trust is really created as security for their claims."^

39. Car Trusts

Another form of trust with transferable shares famil-
iar to investors is the so-called "Car Trust." This is a
method of financing the purchase of rolling stock of a
railroad by giving a first lien on the rolling stock when
purchased and thus preventing it from coming under
the lien of the general railroad mortgages. They have
usually been organized so as to be held to be not part-
nerships.^

to the original owners. The net income which was to be distributed was
always to be regarded as the property of the old firm. A majority of the
creditors could make rules for the conduct of the business and decide to
discontinue it. An action was brought on bills of exchange accepted
by an agent of the trustees against certain creditors who had signed the
indenture of trust. Held : Not a partnership because no mutual agency
of the certificate holders. Cox v. Hickman, 8 H. L. C. 268. The defi-
nition of partnership announced in this case (known as the mutual
agency test) has been generally repudiated.

3 Smith V. Williams, 178 III. 420, 53 N. E. 358; Sterns Co. v. Wil-
liams, 178 111. G26, 53 N. E. 361; Wells-Stone Mercantile Co. v. Grover,
7 N. D. 460, 465, 75 N. W. 911; Re Stanton Iron Co., 21 Beav. 164.

1 Railroad directors and promoters formed car trusts. There was a
trustee who issued certificates in each trust to the subscribers. Brown,
J., said, "The car trust associations were not corporations or partner-
ships nor legal entiticjs of any description, but were simply car trust cer-
tificates in th(! hands of various persons who were represented by the
petitionee, McClourk(!y." Held on peculiar facts of case that the pur-
chiiHcs w(T(^ really made by tlic corporation and not by the car trusts,
antl l,li(! rolling stock came imder the general mortgage. McGourkcy
V. Toledo Co., 14() [J. S. 53(5, 557, 36 L. ed. 1079, 13 S. Ct. 170.

TruHte(!.s of a oar trust signc^d a second lease with the railroad reduc-
ing the rati; of interest. Tlu^y signed as trustees but expressly said they
(•xecut(;d only on behalf of such c(;rtificate holders as should consent,

152

Chap. Ill] TRUSTS FOR BONDHOLDERS [§ 40

§ 40. Trusts for Bondholders

Trusts under mortgages executed by corporations to
secure issues of bonds are, in some aspects, examples of
the sort of trust under consideration. Ordinarily the
functions of the trustee are purely formal and the real
business relation exists between the mortgagor cor-
poration and the bondholders as creditors. With this
relation we have no concern.^ In the relation of the
trustee to the bondholders will be found sometimes
illustrations of the la^ applicable to trusts conducting
business enterprises.^ When such a trustee gets abso-
lute title by entry and possession for the statutory
period, he may execute the trust by liquidating and
dividing the net proceeds among the bondholders.^
In one case he was held justified in leasing the road in-

etc. Some did not consent and the trustees sued on the old lease for
the higher rate for them, the lower rate having been paid the others.
Held: No inconsistency in allowing recovery on the old lease in this
way. It does not matter what authority the trustees had to bind the
minority when they did not purport to exercise it. " In our view whether
the car trust is a partnership or a joint stock association or a quasi-cor-
poration is not of the least importance." Humphrey v. N. Y., etc. R. R.
Co., 121 N. Y. 435, 447, 24 N. E. 695.

Where the trust deed provided for a real association, it was held to
be a partnership. Ricker v. American L. & T. Co., 140 Mass. 346, 5
N. E. 284.

1 In this treatise we are not concerned with the mutual obhgations
between the trustees and the corporation or between individual bond-
holders and the corporation. For a full discussion of the subject see
Jones on Corporate Mortgages and Bonds.

2 When the trustee is to certify bonds and superintend the sale of
them and the apphcation of the proceeds and to do other things in-
volving discretion, it constitutes the transaction of business and
when done in a State by a foreign, corporation subjects it to regu-
lation as such. Farmer's Co. v. Lake Street Ry. Co., 173 111. 439, 51
N. E. 55.

A by-law authorizing bondholders to vote for directors was held in-
valid as contrary to the statutes providing for vote by stockholders.
The interests of stockholders and bondholders are diverse. Durkee v.
People, 155 lU. 354, 40 N. E. 626.

^ Haven v. Grand Jimction Co., 12 AUen 337.

153

§ 41] TRUSTS [Chap. Ill

stead of liquidating.^ It sometimes happens that upon
a foreclosure the trustee is obUged to take possession
and operate the business for a time, though he usually
does this through a receiver appointed by the court.

§ 41. Voting Trusts

Voting trusts of stock in corporations are a form of
trust in which the beneficial interest is frequently rep-
resented by transferable certificates similar to the cer-
tificates of stock which have been deposited by the
shareholders with the voting trustee and for which they
are substitutes. The trust is an active one because the
trustee through his voting power controls the policy
of the corporation and the trust is usually formed to
insure a consistent poUcy on the part of the corpora-
tion for a certain period for the benefit of its other
security holders. The duties of the trustee, however,
are more limited than m most of the other forms of
trust under consideration. A voting trust is legal from
the standpoint of the law of corporations if the holders
of all the shares have an equal privilege (after fair in-
formation) of availing themselves of the trust agree-
ment if they shall so choose and if the object of the
trust is the equal benefit of all shares.^

§ 42. Combinations

The original Standard Oil Trust, which was held in
Ohio to be a partnership,^ was held in New York not a

* Sturges V. Knapp, 31 Vt. 1.

» Warron v. Pirn, 66 N. J. Eq. 353, 59 Atl. 773. Such agreements
were upheld in Brightman v. Bates, 175 Mass. 105, 55 N. E. 809; Lord
V. Equitable Soc, 194 N. Y. 212, 238, 87 N. E. 443; Boyer v. Nesbitt,
227 Pa. St. 398, 76 Atl. 103.

> State V. Standard Oil Co., 49 Ohio St. 137, 17G, 30 N. E. 279.

154

Chap. Ill] RIGHTS OF CREDITORS [§ 43

partnership but a trust.- It was a highly organized
association with transferable shares and on a bill in
equity to compel a transfer of shares on the books of
the trustees, which was defended on the ground that
the transferee was a rival oil producer and did not seek
membership in good faith, the court held that the
trustees had no more discretion than a corporation and
compelled the transfer.^ It would seem that the de-
sire of the court to enforce the transfer and to avoid a
supposed obstacle in the familiar rule of delectus per-
sonae applicable to ordinary partnerships, led it into
the declaration that this association was not a part-
nership.

§ 43. Rights of Creditors 1

The important question in regard to all these forms
of organization is as to the rights of creditors in the
collection of their claim. In the absence of some stipu-
lation in the contract to the contrary, it is well settled
that one who contracts with a trustee has a contract
right at law against the trustee personally, since courts
of law purport to ignore the existence of trusts and the
trustee does not act as agent for his beneficiaries but is
himself the principal. ^ An action at law against the

2 Rice V. Rockefeller, 134 N. Y. 174, 179, 31 N. E. 907.

3 Ibid.

1 See §§ 32 and 33. ^

2 Taylor v. Davis, 110 U. S. 330, 334, 28 L. ed. 163, 4 S. Ct. 147;
American, etc. Co. v. Converse, 175 Mass. 449, 56 N. E. 594; Roger
Williams Bank v. Groton Co., 16 R. I. 504, 17 Atl. 170; Ex parte Gar-
land, 10 Ves. 110, 118 (trustee carrying on business under directions in
will); Cutbush w. jCutbush, 1 Beavan 184 (ditto); Lucas z;. Williams,
4 D. F. & J. 438 (ditto); Fenwick v. Laycock, 2 Q. B. 108 (ditto); Re
Evans, 34 Ch. D. 597, 600 (ditto).

In actions on notes of trustees, it has been held that the addition of
the word "trustee" to the name of the maker was merely descriptio
personae. Comes v. Clark, 12 Cal. 168; Fiske v. Eldridge, 12 Gray 474;
New V. Nicholl, 73 N. Y. 127.

155

§ 43] TRUSTS [Chap. IIT

trustees of a real estate trust was brought by a cred-
itor and an attachment of real estate of the trust was
attempted. Later the trust became insolvent and was
placed in the hands of a receiver. The attaching cred-
itor sought bj'' petition to have his claim allowed in
priority. This was refused on the ground that on no
theory had a valid attachment been made. The court
said: ''The trustees held the legal title to all the prop-
erty and they alone could make contracts. Ordinarily,
in the absence of special limitations, trustees bind
themselves personally by their contracts with third
persons. Actions at law upon such contracts must
be brought against them and judgments run against
them personally. This is because the relations of
the cesiuis que trust to their contracts are only equi-
table and do not subject them to proceedings in a
court of common law and the property held in trust
is charged with equities which hold it aloof from
the jurisdiction of a court of law to take it and ap-
ply it in payment of debts created by the trustees.
Such debts, if proper charges upon the trust estate
can be paid from it under the authority of a court
of equity. ... If the trustees contracted in the usual
way without referring to anything which would limit
the liability resulting from an ordinary contract, they
are personally liable to these petitioners and judg-
ment can be obtained and enforced against them
individually; but the trust property cannot be held
under an attachment nor sold upon an execution for
their personal debts." ^

The trustee may also be held personally liable for
torts committed in the execution of the trust by himself

» Husscy V. Arnold, 185 Mass. 202, 204, 70 N. E. 87.
150

Chap. Ill] RIGHTS OF CREDITORS [§ 43

or his agents.^ The HabiUty of trustees, in cases where
there are more than one, has been held to be joint and
several.^ Stipulations in contracts by trustees exempt-
ing the trustee from personal liability have been held
effective.^ A covenant by trustees ''as such trustees
but not otherwise" to repay a loan is merely a covenant
to repay the money out of any trust funds coming into
their hands and does not impose any personal liability
upon them.^ It is equally well settled that one who con-
tracts with a trustee has no right of action against the
beneficiaries personally.^ The decisions have been less
clear as to the right of the creditor to reach the funds of
the trust. It is plain that in order to recover the cred-
itor must show that ''the obligation was incurred by
the trustees in the com-se of their duty in administering
the trust out of which satisfaction is sought." ^ At

^ Negligence of servants. Parmenter v. Barstow, 22 R. I. 245, 47
Atl. 365; see Fallardeau v. Boston Ass'n, 182 Mass. 405, 65 N. E.
797; Curry v. Dorr, 210 Mass. 430, 97 N. E. 87.

A trustee under a mortgage securing bonds while in possession and
operating the business is liable for negligence hke any other employer.
Ballou ?;. Farnum, 9 Allen 47; Daniels v. Hart, 118 Mass. 543; Strat-
ton V. European R. R., 76 Me. 269; Wright v. Raihoad, 151 N. C. 529,
535, 66 S. E. 588.

^ So that one whose right of indemnity might be barred could be
omitted. Re Frith, (1902) 1 Ch. D. 342.

6 Glenn v. Allison, 58 Md. 527; Shoe, etc. Bank v. Dix, 123 Mass.
148; Mitchell v. Whitlock, 121 N. C. 166, 28 S. E. 292. See Hussey v.
Arnold, 185 Mass. 202, 204, 70 N. E. 87; see §§ 29 to 31, inclusive.

In Glenn v. AUison, supra, the agreement was implied from reference
in a mortgage to the deed of trust which provided that the trustee
should not be personally hable.

' Re Robinson's Settlement, (1912) 1 Ch. 717.

8 Everett v. Drew, 129 Mass. 150.

Transferable scrip issued to finance an invention. Mayo v. Moritz,
151 Mass. 481, 484, 24 N. E. 1083.

^ A by-law ot the Buena Vista Fruit Company, an association or-
ganized under a deed of trust, provided "that the treasurer shall 'make,
sign, endorse and accept for and in the name and behalf of the company
promissory notes, drafts and checks in the regular course of its business.'
The note in suit was made in accordance with this by-law. It is not
signed by the trustees, but by the treasurer of the association in its

157

§ 43] TRUSTS [Chap. Ill

law it would seem that the creditor has no right to at-
tach the trust fund/" but there seems no reason why
such right should not be given b}' proper proceedings in
equity. ^^ The trustee has a right of exoneration out of

name. Article 11 of the declaration of trust probacies that 'all contracts
and engagements entered into by the trustees, and aU conveyances and
instruments executed by the trustees, shaU be in the respective names
of the trustees and shaU provide against any personal Uabihty on their
part, and stipulate that no other property shall be answerable than the
property in the hands of the trustees.' Plainly the note in suit is not
the obhgation of the trustees executed in accordance with the power
thus conferred, but the note of the company executed bj' its agent pur-
suant to its by-laws. Neither in fact nor in legal contemplation is it the
note of the trustees. It follows that the plaintiff has not brought his
case within the principle of law on which his biU is framed and on
which he recovered in the Superior Court, viz., that when a trustee has
incurred an obhgation in conducting the trust, the person to whom that
obhgation is due can satisfy it out of the trust estate. Hence the de-
cree in favor of the plaintiff was wrong, founded as it was upon that
principle of law." Frost v. Thompson. 219 :\Iass. 360, 106 X. E. 1009.
See § 14, note 11.

10 Pillgrem v. Pillgrem, IS Ch. D. 93 (trustee under will carrjdng on
business in own name). See FarhaU v. Farhall, 7 Ch. 123.

In a few cases the trust estate has been reached in an action at law.

In an action of tort for neghgence in a court having both law and
equit}' jurisdiction, one of the defendants was a trustee operating a
railroad for the benefit of creditors and he was held hable in his official
capacity and the trust estate subjected to pajonent. The coiu-t said
also that he might have been held hable personally. Wright v. Railroad,
151 X. C. 529, 535, 66 S. E. 588.

Defendants were sued as trustees in tort for negligence. Under the
deed of trust they "were empowered to deal with the property as if
they were absolute o'micrs thereof. It is also provided that no responsi-
bUity whatever shall result to them by reason of misconduct of agents or
employees and also 'for negligence there shall be no habUity or respon-
sibihty ' upon the part of the trustees." Held : " It was clearly intended
that the risk of any loss in this respect should be assumed and borne
by the estate." A judgment against the trustees as such was affii'med.
Prinz i;. Luca.s, 210 Pa. St. 620, 60 Atl. 309.

" Mason I'. Pomeroy, 151 Mass. 164, 167, 169. 24X.E. 202 (trustees
carrj'ing on a factory under terms of a will) ; Woddrop v. Weed, 154 Pa.
St. 307, 26 Atl. 375 (trustee carrj'ing on under a will a business which
became insolvent).

"The general rule undoubtedly is that a trustee cannot charge the
trust estate by his executory contracts unless authorized to do so by
the temna of the instrument creating the trust. Upon such contracts he
is personally liable and the remedy is against him personally. But
there are exceptions to this general rule. Wlien a trustee is authorized to
make an expenditure and he has no trust funds and the expenditure is

158

Chap. Ill] RIGHTS OF CREDITORS [§ 43

the trust fund for any liabilities he has properly incurred
personally in the management of the trust estate. ^^ It
is entirely consistent with the usual principles of equity
jurisdiction to give the creditor a right to avail himself
of the trustee's right against the trust fund, and there
are decisions to this effect. ^^ In the absence of agree-
ment, however, there would be no reason for holding
that such a creditor had any lien upon the trust fund.^*
If the trustee is absent from the State or is insolvent
(and these are the only cases in which it will be impor-
tant for the creditor to have this right), the creditor
should be allowed to proceed against the trust estate
without joining the trustee. ^^ The creditor's right
would, of course, be limited to the extent of the trus-
tee's right in any given case and if any equity exists
against the trustee in favor of the trust estate with re-
spect to the particular right of exoneration in question,
the creditor must be equally restricted.^'' In some

necessary for the protection, reparation or safety of the trust estate, and
he is not willing to 'make himself personally hable, he may by express
agi'eement make the exj^enditure a charge upon the trust estate. In
such a case he could himself advance the money to make the expendi-
tiu-e and he would have a hen upon the trust estate, and he can by
express contract transfer this hen to any other party who may upon
the faith of the trust estate make the expenditure." Trust under a will.
New V. NichoU, 73 N. Y. 127, 131.

12 Hardoon v. Behhos, (1901) A. C. 118, 124; Bennett v. Wyndham, 4
De Gex. F. & J. 259 (tort).

" Mason v. Pomeroy, 151 Mass. 164, 167, 169, 24 N. E. 202; Dowse
V. Gorton, 40 Ch. D. 536; Ex parte Edmunds, 4 De G. F. & J. 488;
Re Raybould, (1900) 1 Ch. 199 (judgment creditor in action of tort);
Moore v. M'Glynn, (1904) 1 Ir. R. 334.

1* Hewitt V. Phelps, 105 U. S. 393, 26 L. ed. 1072; New v. NichoU,
73 N. Y. 127.

15 Norton v. Phelps, 54 Miss. 467. See Hewitt v. Phelps, 105 U. S.
353, 400, 26 L. ed. 1072, where the same case came up on diverse citi-
zenship. The Norton case was cited as settling the Mississippi law.

i« Broadway National Bank v. Wood, 165 Mass. 312, 316, 43 N. E.
100; Dunham v. Blood, 207 Mass. 512, 514, 93 N. E. 804; King v.
StoweU, 211 Mass. 246, 98 N. E. 91; Strickland v. Symons, 22 Ch. D.
666, 26 Ch. D. 245; Re Evans, 34 Ch. D. 597; Re Johnson, 15 Ch. D.

159

§ M] TRUSTS [Chap. Ill

States, however, the creditor has been allowed to reach
the trust fund regardless of the state of the accounts be-
tween him and the estate. ^^ The beneficiaries are not
necessary parties defendant in actions on contracts or
torts of the trustees, when the trust instrument makes
him their representative, even though the purpose of
the suit is to reach the trust fund.^^ A court of equity
will set aside preferences given by a trustee out of the
trust estate after it is insolvent and distribute it
equally to all creditors. ^^

§ 44. Mutual Obligations of Trustee and Beneficiary i

The obligation of good faith on the part of the trus-
tee towards the beneficiary is the origin of the whole law
of fiduciaries which has come to play so important a
part in the adjustment of our complicated modern re-
lations. He cannot make a secret profit at the expense
of his beneficiary.^ Acting in good faith, a trustee for
bondholders was held justified in bidding in the mort-

54S; Dowse v. Gorton, (1891) A. C. 190; Re Raybould, (1900) 1 Ch.
199; Newton v. Ralfe, (1902) 1 Ch. 342, 345; Boylan v. Fay, 8 L. R.
Ir. 374; Re Morris, 23 L. R. Ir. 333.

»7 Wylly V. Collins, 9 Ga. 223; Willis v. Sharp, 113 N. Y. 586, 21
N. E. 705; Mandcrson's Appeal, 113 Pa. St. 651, 6 Atl. 346; Cater v.
Evorlcigh, 4 Dcs. Eq. (S. C.) 19.

'* See § 45, notes 1-5.

'8 By will a business was left to a trustee with full power to operate it
for the widow and other beneficiaries. The trustee did so until tlie busi-
ness became insolvent and the trustee also. He allowed creditors to
confess judgment against the trust estate by way of preference. Held:
These judgments will be set aside and the trust fund administered for
all the creditors of the business. A trust estate embarked in trade is
liable to creditors for debt. Woddrop v. Weed, 154 Pa. St. 307, 312, 26
Atl. 375.

» Sec § 33.

2 Campbell v. R. R., 1 Woods 368 (U. S.) (trustee for bondholders
during foreclosure ])rocee(iing.s); Ashuelot R. R. v. Elliott, 57 N. H. 397
(truHte(! for l)ondhold(a'8 in possession); AUison's Estate, 183 Pa. St.
655 (assignee for creditors).

160

Chap. Ill] MUTUAL OBLIGATIONS [§ 44

gaged property at foreclosure sale to protect the inter-
ests of the bondholders and reselling it, although the
mortgage did not contain the usual provision author-
izing him to do so,^ but subject to the right of the
bondholders to hold him accountable for negligence in
reselling at a loss.* The fact that one of the voting
trustees is an officer of a railroad with which he votes
to consolidate does not render his vote illegal in the
absence of proof of unfair terms.^ On the other hand, a
holder of voting trust certificates has been allowed to
enjoin the trustee from voting to increase the number
of directors.*' A trustee is liable for losses due to failure
to use the care of an ordinarily prudent man.^ The
trust deed usually contains a stipulation that the trustee
shall be liable only for his own wilful default or neg-
lect. These stipulations have been held vaUd,^ and he
has been held not liable for failure to act through mis-
take or misconception of his duty.^ Wilful default by
a trustee means "intentionally making way with the
trust property, and a wilful neglect means such reckless

3 Nay V. Scranton Trust Co., 240 Pa. St. 500, 87 Atl. 843.

4 Watson V. Scranton Trust Co., 240 Pa. St. 507, 87 Atl. 845.

5 Dady v. Georgia, 112 Fed. 838.

« Byington v. Piazza, 115 N. Y. S. 918, 131 App. Div. 895.

7 Re Leventritt, 58 N. Y. S. 256, 40 App. Div. 429 (assignee for
creditors); Wright's Estate, 182 Pa. St. 90, 38 Atl. 151 (ditto).

* Black V. Wiedersheim, 143 Fed. 359 (trustee for bondholders);
Stratton v. European Co., 74 Me. 422 (ditto); HoUister v. Stewart, HI
N. Y. 644, 19 N. E. 782 (ditto).

By certification of bonds the trustee under the mortgage merely
identifies them and does not increase his liability. Bauerschmidt v.
Maryland Trust Co., 89 Md. 507, 43 Atl. 790; Tschetinian v. City
Trust Co., 186 N. Y. 432, 79 N. E. 401. See Dunning v. Bates, 186
Mass. 123, 71 N. E. 309.

Where the mortgage provided that the proceeds of the bonds were
to be paid out only on a certificate and no express stipulation relieved
the trustee, he was held liable to bondholders on an impUed covenant
to see that the proceeds were paid out only on such certificate. Rhine-
lander V. Farmers Co., 172 N. Y. 519, 65 N. E. 499.

^ Black V. Wiedersheim, 143 Fed. 359 (trustee for bondholders).

161

§ 44] TRUSTS [Chap. Ill

indifference to true interests of the trust as to amount
to or partake of a wilful violation of duty. The differ-
ence between neglect of duty by a trustee and a wil-
ful neglect or default by a trustee is not unlike the dif-
ference between the liability of one who is bound to
exercise due care and the liability of the owner of land
to a trespasser." ^° A trustee is not liable for miscon-
duct of a co-trustee if he himself is blameless. ^^ It is
not necessarily negligent to allow the co-trustee to
handle funds alone/^ but he cannot sleep on his trust. ^^
The beneficiary is entitled to information at reason-
able times as to the trust estate/^ and to accounts.^^
There is no objection to the trustee being also inter-
ested as beneficiary in the trust estate.^® A voting
trustee may sell his own stock and that is not a ground
for obliging him to distribute the trust stock. ^^ The
purchaser of voting trust certificates may compel the
transfer of stock by the trustee.^^ But a claimant of
stock deposited by another cannot compel the trustee
to surrender it until the trust certificate is surrendered
to him.^^ Such certificates have been held not evidence

10 Warren v. Pazolt, 203 Mass. 328, 347, 89 N. E. 381. As to what
is gross negligence of trustee for bondholders who had limited his lia-
bility to that, see Hunsberger v. Guaranty Trust Co., 150 N. Y. S. 190,
164 App. Div. 740.

•1 Colburn v. Grant, 181 U. S. 601, 45 L. ed. 1021, 21 S. Ct. 737.

12 Dyer v. Riley, 51 N. J. Eq. 124, 26 Atl. 327; Purdy v. Lynch, 145
N. Y. 462, 40 N. E. 232.

» Hobnes v. McDonald, 226 111. 169, 80 N. E. 714.

>" Pcrrin v. Lepper, 72 Mich. 454, 543, 40 N. W. 859; Hancox v.
Wall, 28 Hun 214, 218; Barbour v. Cununings, 2() R. 1. 201, 58 Atl. 660.

"- Orr V. Yates, 209 111. 222, 239, 70 N. E. 731.

•» II(!ard V. March, 12 Cush. 580.

" IlaineH v. Kindcrliook, 53 N. Y. S. 368, 33 App. Div. 154.

'« BriH.scll V. Kii:ipp, 155 Fed. 809.

A purchascT of a voting trust certificate gave it to the vendor to get
it transferred. lie pledged it for his own debt. Held: Valid pledge.
Union Trust Co. v. Oliver, 1 10 N. Y. S. 681, 155 App. Div. 646.

'» Bean /;. American L. iV T. Co., 122 N. Y. 622, 26 N. E. 11 (voting
trust).

102

Chap. Ill] MUTUAL OBLIGATIONS [§ 44

of a debt and so not taxable as such.^" A transfer
of voting trust certificates is taxable under the New
York statute. ^^

In addition to the right of a trustee to indemnity
against the trust estate already referred to,^^ the trustee
has a right against his beneficiary personally for indem-
nity against liabilities incurred by him arising out of his
ownership of the trust property, such as a liability for
assessments on shares in corporations held by him in
trust for a syndicate.-^ It has been held, however, that
a beneficiary was not bound by a stipulation in the
declaration of trust obligating her to reimburse the
trustee for certain expenditures unless she assented to it
and that if she did not execute the declaration of trust
she might show by oral evidence that her consent was
absolute or conditional, that is, that she reserved the
right to withdraw. If she assented without qualification
she could not afterward annex a condition to her assent
without the consent of the parties interested. ^^ In other
words, the issue in this case was not whether the trustee
had a right of indemnity against the beneficiaries, but
who were the beneficiaries.

Although a court of equity is the proper tribunal to
adjust the mutual rights of trustee and beneficiary,
it has been held that after the trust has been terminated
by sale of the trust property under foreclosure proceed-
ings, the trustee may bring an action of contract at
law against the beneficiaries on an express agreement
in the declaration of trust by the beneficiaries to reim-

20 Comm. V. Union Co., 192 Pa. St. 607, 43 Atl. 1010.

21 U. S. V. State of N. Y., 208 N. Y. 144, 101 N. E. 783.
^ § 43, note 12 et seq.

23 Hardoon v. Belilios, (1901) A. C. 118, 125. See § 64, notes 2
and 3.

^ Cunniff v. McDonnell, 196 Mass. 7, 10, 81 N. E. 879.

163

§ 45] TRUSTS [Chap. Ill

burse the trustees for certain expenses.^^ A trustee in
most of the United States is entitled to receive compen-
sation for his services,-^ and when reasonably neces-
sary to employ counsel and pay his charges out of the
estate.^^

The natm'e of the interest of the beneficiary in the
trust res has already been discussed.^^

§ 45. Representation of Beneficiaries by the Trustee

The ordinary rule is that the beneficiaries must be
parties to all suits in equity affecting the trust/ but
not to actions at law.^ The trustee may, however, be
held to represent the beneficiaries to such an extent
that a decree against him will bind them though not
formally joined as parties. *' It cannot be doubted that
under some circmnstances a trustee may represent his
beneficiaries in all things relating to their common in-
terest in the trust property. He may be invested with
such powers and subjected to such obligations that
those for whom he holds will be bound by what is done

25 Cunniff v. McDonneU, 196 Mass. 7, 10, 81 N. E. 879.

26 Barney v. Saunders, 16 How. 535, 542; Barrell v. Joy, 16 Mass.
221; McDougal v. Fuller, 148 Cal. 521, 83 Pac. 701 (assignee for cred-
itors); Re Hulburt, 89 N. Y. 259 (ditto); Coleman's Estate, 200 Pa. St.
29, 49 Atl. 798 (ditto).

Contra. In England, Re Pooley, 40 Ch. D. 1, and in Delaware State
V. Piatt, 4 Harr. 154.

A committee of creditors managing a business in the hands of trus-
tees under an insolvent assignment, were entitled to sue the creditors
for compensation for their services. Bingaman v. Hickman, 115 Pa.
St. 420, 8 Atl. 644.

" Tcague v. Corbitt, 57 Ala. 529; National Bank v. Dulaney, 96
Md. 159, 171, 53 Atl. 944 (assignee for creditors); Foi-wardi*. Allen,
0 Allen 494, 497; Berkeley v. Green, 102 Va. 378, 381, 46 S. E. 387 (as-
Hignc(! for cnxlitors).

2" See § 21.

• Zehnbar v. Spillman, 25 Fla. 591, 598, 6 So. 214; McGraw v. Bay-
ard, 06 111. 146, 153.

2 Clieutham v. Rowland, 92 N. C. 340.

164

Chap. Ill] REPRESENTATION OF BENEFICIARIES [§ 45

against him as well as what is done by him. The diffi-
culty lies in ascertaining whether he occupies such a
position, not in determining its effect if he does. If
he has been made such a representative, it is well
settled that his beneficiaries are not necessary parties to
a suit by him against a stranger or to one by a stran-
ger against him to defeat it in whole or in part." ^ The
beneficiaries are then bound by the judgment against
the trustee in the absence of fraud or collusion.'* The
court, of course, may in its discretion join the benefici-
aries as parties.'' The Federal courts obtain jurisdiction
through diverse citizenship of the trustee though the
beneficiary is a resident of the same State with the ad-
verse party.*' The trustee under the usual form of mort-
gage to secure bondholders in many respects is the
representative of his beneficiaries. Thus notice to him
of the existence of a prior encumbrance on the property
mortgaged has been held to be notice to the bond-
holders.'^ The trustee is the appropriate party to fore-
close the mortgage.^ He cannot delegate this duty to

' "From this it appears that he was not only invested with the legal
title to the property, but that all parties relied upon his judgment and
discretion for the protection of their respective interests. A clear in-
tent is manifested of relieving the creditors from the necessity of look-
ing personally to the conversion of the securities or to the preservation
of the trust." Trust of certain land for the benefit of creditors. Kerri-
son V. Stewart, 93 U. S. 155, 160, 161, 23 L. ed. 843; Cheatham v. Row-
land, 92 N. C. 340, 343; see Winslow v. Minn., etc. R. R., 4 Minn. 313,
317.

* Kerrison v. Stewart, 93 U. S. 155, 160, 23 L. ed. 843.

5 Francis v. Harrison, 43 Ch. D. 183.

« Dodge V. TuUeys, 144 U. S. 451, 456, 36 L. ed. 501, 12 S. Ct. 728.

Jurisdiction was denied where the beneficiary was a non-resident,
but the trustee resided in the same State as the other party. All the
trustees must be non-resident. Shipp v. Wilhams, 62 Fed. 4.

7 Coe V. N. J. R. R. Co., 31 N. J. Eq. 105; MiUer v. Rutland Co., 36
Vt. 452, 484; Fidelity Co. v. Shenandoah Co., 32 W. Va. 244, 9 S. E.
180. But see Johnson County v. Thayer, 94 U. S. 631, 24 L. ed. 133;
Curtis V. Leavitt, 15 N. Y. 9, 194, 195.

8 Consohdated Water Co. v. San Diego, 89 Fed. 272; Shaw v. Nor-

165

§ 45] TRUSTS [Chap. Ill

the holders of a majority of the bonds and is Hable to a
minority for damages sustained by such a course.^
But if he has a discretion as to action or not, he may
properly follow the desires of holders of a majority of
bonds acting in good faith. ^'^ In a foreclosure suit by
the trustee the corporation cannot set off a claim against
the individual bondholder. ^^ Bondholders can proceed
themselves against the mortgagor to protect the trust
estate only if redress cannot be obtained through the
trustee. ^^ Thus it is held that if the trustee refuses or
unreasonably neglects to act, bondholders may proceed
independently after request to the trustee,^^ or they may
proceed against the trustee and compel him to act.^*
When by the terms of the mortgage the trustee is en-
titled to indemnity against loss or expense before he
can be compelled to act, and refuses to proceed without

folk County R. R. Co., 5 Gray 162; Virginia Co. v. Fisher, 104 Va. 121,
51 S. E. 198; Re Chickering, 56 Vt. 82.

Contra. Bondholders necessary parties. Tyson v. Applegate, 40
N. J. Eq. 305; Davis v. Hemingway, 29 Vt. 438; Day v. Wetherby,
29 Wis. 363.

Bondholders may be admitted in the discretion of the court. Fink
V. Bay Shore Co., 144 Fed, 837.

Failure of the trustee to contest a prior mortgage may be sufficient.
Met. Trust Co. v. Central Trust Co., 93 C. C. A. 671, 168 Fed. 1021.

9 Merrill v. Farmers Co., 24 Hun 297.

'0 First Bank v. Shedd, 121 U. S. 74, 30 L. ed. 877, 7 S. Ct. 807; State
V. Brown, 73 Md. 484, 21 Atl. 374.

11 Dickerman v. Northern Trust Co., 176 U. S. 181, 44 L. ed. 423, 20
S. Ct. 311.

" Bill by bondholders on behalf of all others against the trustees
under the mortgage and directors of the corporation for allowing lessees
of the corporation's mine to waste it. Held: Bondholders can proceed
themselves only if redress cannot be obtained through the trustee.
Negligence of (he trustees is not enough. Directors of the corporation
owe no fidu(;iary obligation to the bondholders. Young v. Haviland,
215 Mass. 120, 123, 102 N. E. 338.

» Wel)b V. Vt. Cent. Ry. Co., 9 Fed. 793; Siebert v. Minn. Co., 52
Minn. 148, .'">3 N. \V. 1134; Schultze v. Van Doren, 65 N. J. Eq. 764, 55
Atl. 1 133; O'Bcirne v. Allegheny Co., 151 N. Y. 372, 45 N. E. 873. See
Citizens Bank v. Los Angehis Co., 131 Cal. 187, 63 Pac. 462.

" First Nat. Co. v. Salisbury, 130 Mass. 303.

IGG

Chap. Ill] MANAGEMENT OF TRUST ESTATE [§ 46

it, the bondholders must furnish it before they are en-
titled to act independently.^^ When, however, the
trustee has taken a position where his interest conflicts
with his duty as trustee, no request is needed,^^ and so
when for any other reason an appeal to the trustee
would obviously be useless.^^

§ 46. Management of Trust Estate

Courts will not interfere with the directions pre-
scribed in the trust deed for the management and con-
trol of the trust ^ unless the preservation of the estate
requires it.^ The trustee cannot delegate his authority,^
but, of course, may appoint agents to perform purely
ministerial functions.'* In the absence of any provi-
sions to the contrary in the trust instrument, the trus-
tees must act jointly in matters involving the exercise
of their discretion.^ In purely ministerial matters or

15 Falmouth Bank v. Cape Cod Co., 166 Mass. 550, 44 N. E.
617.

1* American Co. v. Kentucky Co., 51 Fed. 826.

" Wheelwright v. St. Louis Co., 56 Fed. 164 (office vacant); Ett-
linger v. Persian Co., 142 N. Y. 189, 36 N. E. 1055.

In California it is held that when the trustee need act only at the re-
quest of holders of a majority of bonds and is therefore justified in re-
fusing to act, a minority may proceed directly. Citizens Bank v. Los
Angeles, 131 Cal. 187, 63 Pac. 462. See Western Penn. Hospital v.
Mercantile Co., 189 Pa. St. 269, 42 Atl. 183.

For an unusual form of trust certificate in which the same rule was
apphed, see Land Title & Trust Co. v. Asphalt Co., 127 Fed. 1; Land
Title & Trust Co. v. Tatnell, 132 Fed. 305.

Bondholders were allowed to intervene in a receivership without
joining the trustee when he was out of the jurisdiction. Anthony v.
Campbell, 112 Fed. 212.

1 Winthrop y. Attorney General, 128 Mass. 258 ;• Pennington w. Met.
Museum of Art, 65 N. J. Eq. 11, 23, 55 Atl. 468.

2 Johns V. Johns, 172 111. 472, 50 N. E. 337.
» Suarez v. Pumpelly, 2 Sandf. Ch. 336, 340.

* Spenglar v. Kuhn, 212 111. 186, 72 N. E. 214; Donaldson v. Allen,
182 Mo. 626, 81 S. W. 1151.

* Hosch Lumber Co. v. Weeks, 123 Ga. 336, 51 S. E. 439; Coleman
V. ConnoUy, 242 lU. 574, 90 N. E. 278.

167

§ 46] TRUSTS [Chap. Ill

in an emergency, to preserve the fund, one may act
alone. ^ Courts uphold stipulations in the trust deed
giving a majority of the trustees or less than all the
power to act even in matters involving discretion,' but
even in such cases it has been held that those not acting
are entitled to notice of the contemplated action and an
opportunity to be heard. ^ A trustee has the right under
certain circiunstances to seek the advice of a court of
equity as to his rights and obligations in advance of
acting.^ This is not, however, a means whereby the
trustee can relieve himself of the entire burden of
managing the trust. The requisites for a bill for
instructions have been said to be ''the possession of
a fiduciary fund of which some disposition is neces-
sarily to be made presently; conflicting claims or
the probability^ thereof; and the existence of no other
means of determining rights or demands so as to
protect a trustee from the risks of future liability
or controversy." ^° A decree on such a petition for
instructions, when the beneficiaries are parties, is res
judicata as to them, if they later try to make the
trustee account on a different basis. ^^ A trustee may
transact business in other States under the protec-

^ Vandever's Appeal, 5 Watts & G. 405.

■' Duckworth v. Ocean Co., 98 Ga. 193, 26 S. E. 736; Barney v. Chit-
tendon, 2 G. Greene 165 (la.); Ratcliffe v. Sangston, 18 Md. 383, 389.

8 Loud V. Winchester, 52 Mich. 174, 185, 17 N. W. 784 (trust for
creditors); Heard v. March, 66 Mass. 580, 584.

Of course an act by one trustee in the name of both may be ratified
by the other. Ubhoff v. Brandenburg, 26 App. D. C. 13.

» Diggs V. Fidehty Co., 112 Md. 50, 75 Atl. 517; Chase v. Ladd, 155
Ma.sH. 417, 29 N. E. 637; Hoagland v. Cooper, 65 N. J. Eq. 407, 56 Atl.
705.

'» Bullard v. Attorney General, 1.53 Mass. 249, 26 N. E. 691. See
Hewitt V. Green, 77 N. .J. Kq. 345, 77 Atl. 25.

» Thorn v. De Hrcteuil, 179 N. Y. ()4, 79, 8.5, 71 N. E. 470 (here
Bomc of the beneficiaries were infants, but the court said they had been
HufTiciently represented by the adults).

168

Chap. Ill] CHANGE OF TRUSTEE [§ 47

tion of the Constitution of the United States and a
statute purporting to prohibit the transfer of any real
or personal property in Indiana to a non-resident trus-
tee except by will was held unconstitutional.^^

§ 47. Change of Trustee

A court of equity can always remove a trustee for
cause. ^ Assignees for the benefit of creditors have been
removed for misconduct and incapacity and a successor
appointed on petition of creditors for whose benefit the
assignment was made.^ Trustees under mortgages
securing bonds have been removed because of residence
in a State at war with that in which the trust is being
administered,^ and even for removal of residence to a
foreign country,^ but not for mere temporary absence.^
A trustee of a voting trust has been removed for electing
himself as officer at an excessive salary and he has been
made to account for the salary.*^ The legislature can-
not by statute substitute a new trustee, for that would
impair the obligation of contract.^ Where the trust
deed itself provides for the removal of a trustee and ap-
pointment of his successor, the beneficiaries may remove

12 Roby V. Smith, 131 Ind. 342, 30 N. E. 1093; Shirk v. Lafayette,
52 Fed. 855; Farmers Co. v. Chicago, 27 Fed. 146, 149.

1 May V. May, 167 U. S. 310, 42 L. ed. 179, 17 S. Ct. 824.

2 Haven v. Sibbald, 41 Atl. 371 (N. J.); Bryson v. Wood, 187 Pa.
St. 366, 41 Atl. 473; Estate of Ahl, 192 Pa. St. 370, 43 Atl. 956; Taylor
V. Mahoney, 94 Va. 508, 27 S. E. 107; Morgan v. South Co., 100 Wis.
465, 76 N. W. 354; State v. Johnson, 105 Wis. 164, 178, 83 N. W.
320.

3 Ketcham v. Mobile, etc. Co., 2 Woods 532 (U. S.).
* Farmers Co. v. Hughes, 11 Hun 130.

5 Equitable Co. v. Fisher, 106 111. 189.

6 Ehas V. Schweiger, 50 N. Y. S. 180, 27 App. Div. 69. See Lawrence
V. Curtis, 191 Mass. 240, 77 N. E. 314; Barbour v. Weld, 201 Mass. 513,
87 N. E. 909.

' Trustee under mortgage securing bonds. Knapp v. R. R. Co., 20
WaU. 117, 122; Fletcher v. Rutland Co., 39 Vt. 633.

169

>{

§ 47] TRUSTS [Chap. Ill

him so long as they act in good faith. ^ Its provisions
should be strictly followed or the acts of the successor
may be held invalid.^ A voting trustee resigned and a
new one was substituted in accordance with the terms
of the trust deed. There was litigation as to some stock
and the trustee wished to be fully protected. He was
allowed to file a bill in equity to have the court accept
his resignation, pass on his accounts and appoint his
successor. ^'^ So an assignee for the benefit of creditors
may be permitted by the court to resign." A new
trustee may be appointed where a vacancy exists from
any of the usual causes. ^^

8 May V. May, 167 U. S. 310, 42 L. ed. 179, 17 S. Ct. 824; March v.
Romare, 116 Fed. 355 (C. C. A.).

9 Farmer's Co. v. Chicago, 27 Fed. 146; Equitable Co. v. Fisher, 106
111. 189; Richards v. Merrimack Co., 44 N. H. 122. See Shaw v. Norfolk
County R. R. Co., 5 Gray 162.

10 Moore Co. v. National Sav. Co., 218 U. S. 422, 54 L. ed. 1093,
31 S. Ct. 64.

11 Andrews v. Wilson, 114 Ky. 671, 71 S. W. 890.

12 Brown v. Parker, 97 Fed. 446 (assignee for creditors); Claflin Co.
V. Middlesex Co., 113 Fed. 958 (ditto); Tuttle v. Merchants Bank, 19
Mont. 11 (ditto); Rogers v. PeU, 166 N. Y. 565, 60 N. E. 265 (ditto).

170

CHAPTER IV

UNASSOCIATED GROUPS

§ 48. In General

There are numerous instances of groups of individ-
uals engaged in business which do not fall in either of
the classifications yet discussed, that is, they are
neither partnerships nor trusts. It is important, how-
ever, for purposes of comparison with true associations
to illustrate briefly the nature of these groups. They
take a great variety of forms but involve only an appli-
cation of the law of agency.

§ 49, Lloyd's Insurance

In some jurisdictions it is still common to carry on
the business of insurance in an ancient form which is
known as Lloyd's. To some extent such insurance has
been regulated by statute. The policy varies from the
usual form in that it is made not by a single insurer, but
by a group of insurers who expressly contract, not as
partners, but as individuals, and who undertake to be
liable only each for his own pro rata share of the loss.
They act through a designated agent upon whom it is
agreed process may be served which shall be binding
upon all insurers. Their transactions are of such a
nature that the question whether they are partnerships
or not has seldom been expressly decided, the court
having simply to determine whether their obligation
was joint or not. In several cases they are described

171

§ 49], UNASSOCIATED GROUPS [Chap. IV

simply as associations, or are said to fall within the
description of statutes restricting the right of foreign
associations to transact business in that State,

A Lloyd's insurance association which had been peti-
tioned into involuntary bankruptcy claimed that a
petition could not be filed against it as a separate entity,
but only against the individual members as partners.
The policies issued expressly made the liability of the
underwriters several and not joint, "as though each
under-^Titer had issued a separate and individual
policy." The business was conducted by managers,
but it was organized under articles of association, its
members held meetings and did business and issued
policies in its. company name, viz., Seaboard Fire
Underwriters. The court held that the United
States Bankruptcy Act specifies "any unincorporated
company" as well as person and corporation as sub-
ject to involuntary bankruptcy and that this was
an unincorporated company within the meaning of
the act.^

A statute authorized quo warranto against "an asso-
ciation of persons acting as a corporation within the
State without being legally incorporated." The court
held that this applied to a foreign fire Lloyd's associa-
tion issuing policies in the State because they professed
to limit their liability to the amount of money contrib-
uted by each and assumed to give perpetuity to the
business by making membership certificates transfer-
able. The fact that they might be held individually
liable, the court said, did not relieve them of the
charge of having tried to act as a corporation. They
were an association because they acted under a com-

» Re Seaboard Fire Underwi-itcrs, 137 Fed. 987 (D. C. — N. Y.).

172

Chap. IV] LLOYD'S INSURANCE [§ 49

pany name, viz., " Guarantee and Accident Lloyds, New
York," and the subscribers chose an advisory committee
who controlled the capital like a board of directors and
executed a power of attorney to the same individual to
manage the business.^

On a petition for license to engage in the insurance
business the Alabama court said: "According to the
showing made by i the petition the business was to be
carried on in the manner of the ancient Lloyds. The
respective liabilities and limitations of liability of the
individual members to each other . . . are such that
the business of insurance thus carried on may be in-
cluded within the scope of the term 'Company,' 'asso-
ciation,' or 'individual.' Each underwriter is individu-
ally liable for a fixed amount, but not for the whole or
for any part of another underwriter's liability, yet all
act together to effect the contract of insurance. In
the former respect it is an individual undertaking which
becomes binding by the separate action of all. In the
latter respect the policy is also the contract of a ' com-
pany' or ' association.' It is not a partnership in a legal
sense and in no sense can it be considered a corpora-
tion. It is an association or company of individuals
organized to do an insurance business upon certain
stipulations and conditions evidenced by their written
agreement." The Alabama statute requiring sta,te-
ments, etc., from foreign companies did not apply to
any but corporations. Hence the plaintiff was held
entitled to his license.^

2 State V. Ackerman, 51 Ohio St. 163, 196, 198, 87 N. E. 828; ace.
Greene v. People, 150 111. 513, 21 N. E. 605.

3 Hoadley v. Purifoy, 107 Ala. 276, 289, 18 So. 220.

The Georgia statute forbidding insurance companies to transact
business in the State without a hcense was construed as applicable only
to corporations. Hence the agent of "the Guarantee and Accident

173

§ 49] UNASSOCIATED GROUPS [Chap. IV

In these cases and in some others they have been
organized under agreements which provide for asso-
ciation in a common enterprise in a way that should
properly be held a partnership. A certificate was is-
sued by the Buffalo Fke and Marine Underwriters in-
suring "subject to the conditions of open policy No. —
at the Buffalo Agency." ''Valid when countersigned
by the authorized agent of the Company at Buffalo."
The open policy in fact was a Lloyd's policy of nineteen
underwriters. The certificate was issued in Ohio.
The New York Com-t of Appeals held that the New
York law forbade doing business under a fictitious name
and that the defendant underwriters were liable as a
company since they called themselves such in the cer-
tificate and an association in their articles. It further
held that if it were deemed a company with limited
liability this notice of lunitation of liability was in-
sufficient. ''This company or association was not in-
corporated, was in no wise exempted by law from part-
nership liability, except as it should in its agreement
with the insured actually and expUcitly so exempt it-
self. This does not mean that seemingly constructive

Lloyds" which the court said was "a voluntary unincorporated associa-
tion consisting of one hundred natural persons" was not Hable for the
penalty. Fort v. State, 92 Ga. 8, 13, 18 S. E. 14.

An insurance scheme whereby the insured paid premiums to an at-
torney in fact in Kansas City, who after deducting twenty-five per cent.
for his services and expenses used the rest as a mutual insurance fund
for the policy holders called the Manufacturing Lumberman's Under-
writers, was h(!ld to be an association transacting the business of insur-
ance in Mississippi and subject to the laws regulating insurance. The
statute exj)ressly included associations. State v. Alley, 9G Miss. 720,
7G0, .51 So. 4()7.

Statute of Missouri construed to prohibit transacting business of
insurance by individuals oi- imincoi7)orated associations as well as cor-
porations without compliance! with its ])rovisi(ms. State can regulate
this buHJncHH if no discrimination between individuals. Hence the agent
of a New York Lloyds was subject to the statute. State v. Stone, 118
Mo. 388, 24 S. W. 164.

174

Chap. IV] LLOYD'S INSURANCE [§ 49

notice which is so contrived and intended as to be
hidden in the letter and not to be perceived or suggested
until searched out of its lurking place after a loss. It
means a notice so plain and fair that the party to be
charged with it either receives it or it is his own fault
if he does not." But an underwriter whose name
was printed in the policy was not liable because he
notified the attorney that he retired before this policy
was issued. He never attended any meetings. Al-
though he did not recall the power of attorney or pub-
lish notice, plaintiff did not know he ever had been a
member of the association and was not misled.^ In
other cases where the nature of Lloyd's groups was in
question the courts have treated them not as associa-
tions but as liabilities in severalty.^ In still other cases

* Imperial Shale Brick Co. v. Jewett, 169 N. Y. 143, 150, 62 N. E.
167, 169.

A statute imposed an assessment on premiums in favor of the plain-
tiff who sued the attorney of a Lloyds on the theory that he was the
treasurer of an unincorporated association of over seven members who by
another statute could be sued in that way. Held : Though the Lloyds'
policy is one of individual habiUty the members are an association and
act as such in issuing the pohcies and collecting the premiums which
belong to the association. The attorney performs the functions of a
treasm-er and so can be sued under the statute, there being no formal
treasurer or president. N. Y. Board of Fire Underwriters v. ^Vhipple,
65 N. Y. S. 188, 36 App. Div. 49.

A Lloyds reinsured its risks with the defendant. The contract was
made in the name under which they were doing business, viz., "Indi-
vidual Underwriters at Commercial Lloyds." The plaintiff, one of the
underwriters having paid losses, brought an action against the defend-
ant on the contract. Held: Cannot be maintained without joining all
members of the association. The contract was made "not with the in-
dividual members composing the association but with the association
itself." It is a joint obhgation. Thompson v. Colonial Assurance Co.,
70 N. Y. S. 85, 60 App. Div. 325.

* A State cannot impose restrictions on citizens of another
State doing business in it which it does not apply to its own citi-
zens. At common law an individual can write insurance and no
statute of lUinois forbids. If the requirements imposed on foreign
corporations are meant to be applicable to individuals, they are
unconstitutional. Hence the agent of a New York Fire Lloyds was
not hable to the penalty. Barnes v. People, 168 lU. 425, 429, 48

175

§ 49] UNASSOCIATED GROUPS [Chap. IV

no inference can be drawn from the decision as to the
attitude of the court on this point. ^ It should be noted,

N. E. 91. See Warfield-HoweU Co. v. WilHamson, 233 111. 487, 495,
84 N. E. 706.

"Of course the underwriters do not constitute a joint stock company
or association." Gough v. Satterlee, 52 N. Y. S. 492, 497, 32 App. Div.
33.

Action against members of several Lloyds companies for services
rendered apparently in connection with litigation. Held: Not sufficient
evidence of authority of general manager to bind the defendant. The
power of attorney should be produced or its loss proved as preliminary
to secondary evidence of its contents. It should also appear that de-
fendant was an underwTiter on each pohcy with respect to which plain-
tiff performed services. Langbein v. Tongue, 54 N. Y. S. 145, 25 Misc.
757.

A statute forbidding acting as agent of a foreign insm-ance company
without a license did not apply to the agent of a Lloj-ds because the
statute applies only to agents of coi-porations. "The pohcy in question
was undoubtedly a pohcy executed by one himdi'ed indi\'idual persons
and contracting for individual habilitj' of all." Comin. v. Reinoehl, 163
Pa. St. 283, 290, 29 Atl. 896.

No action can be brought on a Lloyds pohcy since insurance b}^ indi-
viduals is forbidden by statute in Pennsylvania. \Yeed v. Cimiing, 12
Perm. Super. Ct. Rep. 412, 416.

A Lloj'ds pohcy subscribed by "The Shipowners' SjTidicate (Re-as-
sured) John ]M. Corderoy, Manager," followed by the names of individ-
uals with the proportion of the insm'ance effected by each indicated after
his name contained a clause, "It is specially agreed that the assured are
hereby entitled, by way of further security for the performance of the
obUgations of the subscribing underwTiters and of each and every of
them, to the benefit by way of first charge of the pohcies of re-insurance
effected or to be effected and of all moneys received thereunder."
Held: The several liabihty usually resulting from this form of pohcy was
not enlarged by this clause which seems to have been intended to pre-
vent the loss of the security by insolvency of any of the undei^nTiters.
It was contended that the word "sjmdicate" imported acting together
and meant something equivalent to firm or partnership. But the court
said "the word 'sjTidicate' does not indicate in what waj^ the members
are acting together." Tyser v. Shipowners' SjTidicate, (1896) 1 Q. B. D.
135.

• An action was brought "against the members of a Lloyds insurance
association composed of individuals residing for the most part in Canada
and known as the New York Commercial Underwriters on a policy of
in.surancf' against perils of the sea." The individual underwriters
insured "joint ly and soverallj'." Held : The declaration was not demur-
rable because somo of tiie defendants named were out of the jurisdic-
tion and could not be served. Richmond Cedar Works v. Buckner, 181
Fed. 424 (C. C. — N. Y.).

A Florida statute imposing conditions on foreign unincorporated as-
sociations and individually issuing poUcies in that State wliich were not

17G

Chap. IV] LLOYD'S INSURANCE [§-49

however, that even the cases that call the underwriters
an association usually recognize that their liability as
insurers is several and not as partners. In other words,
in the only business they intend to transact they do not
act as associates but as unassociated individuals. There
should be no difficulty, therefore, in so drawing their
organization agreement that no association will result
from their activities and in the normal case they will
be simply a group of independent contractors acting
through a conunon agent.

It is usually provided in these policies that no ac-
tion shall be brought on it except against the manager
as attorney in fact representing all the underwriters and
each underwriter agrees to abide by the result of such
action as fixing his individual responsibility under the
policy. This means that the action on the policy is to
be brought against the manager and the amount of the
loss fixed and pro rated among the underwi'iters. The
validity of these stipulations has been sustained where
the manager against whom the action is to be brought
is also one of the underwriters and therefore is liable in
contract to the plaintiff.^ When judgment has been

imposed on citizens of Florida was held unconstitutional. State ex rel.
Hoadley v. Board of Ins. Commissioners, 37 Fla. 564, 574, 29 So.
772.

A majority of the court held constitutional the statute of Pennsylva-
nia forbidding the issue of poUcies of insm-ance by individuals, partner-
ships or associations. It did not discriminate against citizens of other
States. Comm. v. Yrooman, 164 Pa. St. 306, 20 Atl. 217.

The statute of Pennsylvania making it unlawful for any person, part-
nership or association to execute poUcies of fire insurance in the State
makes it improper to hcense the agent of a New York Lloyds Associa-
tion. Opinion of Attorney General, re License in Pennsylvania, 3 Pa.
Dist. Rep. 822.

^ Where the attorneys are also underwriters action is properly
brought against them, the amount of the loss and the liabihty of each
underwriter determined. It will be binding upon the underwriters hke
any agreement to be bound by a judgment against another. Leiter v.
Beecher, 37 N. Y. S. 1114, 2 App. Div. 577. Ace. Lawrence v. Schaefer,

177

§ 49] UNASSOCIATED GROUPS [Chap. IV

obtained against the attorney in accordance with the
terms of the pohcy an action may be brought against
the individual underwriter on his agreement to abide by
that judgment. He is bound by that judgment because
he agreed to be and can raise no question as to the vahd-
ity of the pohcy. ^ Where the attorney was not also an

42 N. Y. S. 992, 19 Misc. 239, aff'd 46 N. Y. S. 719, 20 App. Div. 80;
Stieglitz V. Belding, 45 N. Y. S. 670, 20 Misc. 297.

An additional clause, however, requiring the action to be brought
only in a specified court of New York, was void. McLean v. Tobin, 109
N. Y. S. 926, 58 Misc. 528.

"There is a wide difference in principle between restricting the power
of the courts to adjudicate on the rights of htigants arising under con-
tracts and the provision that a fund owned by the persons liable in dam-
ages may be reached in an action against the custodians of that fund
and the individual liabihty of the owners of the fund shall be fixed by
the judgment in such actions and enforced against them after the fund
is exliausted." Action was properly brought against the attorneys.
Compton V. Beecher, 44 N. Y. S. 887, 890, 17 App. Div. 38.

Judgment against the attorney is a condition precedent to action
against the individual underwriter on a Lloyds pohcy and must be
pleaded and proved by the plaintiff. Ketchum v. Belding, 68 N. Y. S.
1099, 58 App. Div. 295.

A stipulation in a pohcy that no action shall be brought upon it
against more than one underwriter at a time and that the others agree to
abide by it is vahd and is a sufficient answer to an action against all the
underwriters. The action should be dismissed as against all but one.
New Jersey, etc. Works v. Ackerman, 39 N. Y. S. 585, 6 App. Div. 540.

After the insured recovered judgment by default against the attor-
ney, he brought an action against the underwriter. Later the attorney
had the judgment vacated and a trial in which plaintiff again got judg-
ment. This he now seeks to set up by supplemental complaint. Held:
By the terms of the policy that "no action shall be brought against
more than one underwriter at any time" is meant "at any one time"
and this was not violated here. There is no provision in this pohcy
requiring judgment against the attorney as a condition precedent.
Peabody v. Germain, 57 N. Y. S. 860, 40 App. Div. 146.

* Hence the fact that the Lloyds had not complied with the statute
requiring all persons, partnerships or associations to make the same
deposits with the insurance commissioner as a coiiioration was immate-
rial. Conant v. Jones, 64 N. Y. S. 189, 50 App. Div. 33t).

An action was broiiglit in New Jersey on a IJoyds policj^ against an
und(!r\\Tit(!r after judgment against tlie attorney in New York. The
action was on tli(' jjolicy, not on tlie judgment. Hckl: Tlie obtaining
of the judgnierit is iiuinsly a condition precedent to action on the pohcy
ugaiiisl t lie iirid(Twrit(;rH. It could not merge the cause of act ion against
th(! un(lcrwrit(;rH bticause they are not named as ])arties. The amount
it fixes is at least pritna facie evi(lciic(! as against this defendant (will

178

Chap. IV] LLOYD'S INSURANCE [§ 49

underwriter action has been allowed directly against
the underwriters on the ground that the stipulation
that action must first be brought against the attorney is
incapable of performance and so not a condition pre-
cedent to an action directly against the underwriters.
The attorneys could not be sued because, not being
underwriters, they were not parties to the contract of
insurance and because they acted for known principals
they could not be sued as agents.^ When at the time

not decidie if conclusive). When the attorney is also an underwriter it
is a valid condition. Such poUcies are valid in the absence of statutes
forbidding them and the underwriters may do business in other States.
Enterprise Co. v. Mundy, 62 N. J. L. 16, 42 Atl. 1063, 1065.

An action was brought against the attorney. The policy provided
for apportionment of the funds in the hands of the attorney among all
claims pro rata. It was alleged that there were losses requiring such ap-
portionment. Held : The pohcy does not contemplate an equitable pro-
ceeding for accounting and apportionment as a condition precedent to
action against the individual underwriters, but an action at law with
execution on the judgment. Hence it is to be satisfied out of the trust
fund in the hands of the attorney, if any, for its full amount. Hence
evidence of the existence of other claims was properly excluded. Other
persons not parties of record cannot be bound by such a judgment. The
underwriter cannot be bound individually by this judgment because not
a party. The attorney is not trustee of the underwriters for that pur-
pose. Gough V. Satterlee, 52 N. Y. S. 492, 32 App. Div. 33.

9 Knorr v. Bates, 35 N. Y. S. 1060, 14 Misc. 501; Biggert v. Hicks,
42 N. Y. S. 236, 18 Misc. 593; Railh v. White, 46 N. Y. S. 376, 20 Misc.
635.

Where the attorney is not himself an underwriter and never in any
way became liable thereon, the condition precedent that action shall first
be brought against the attorneys is against pubUc policy and void. Far-
jeon V. Fogg, 37 N. Y. S. 980, 16 Misc. 219.

When the attorney is not an underwriter he cannot be sued in spite
of the provision in the pohcy. Under the New Jersey statutes an
association may be sued in its association name on any action affecting
the common property. There was an association and so action properly
brought. Bank of Toronto v. Manf . & Merch. Fire Ass'n, 63 N. J. L.
5, 13, 42 Atl. 761.

A Lloyds pohcy contained a clause not expressly authorizing an ac-
tion against the attorney but forbidding an action against more than
one underwriter and binding the others by the judgment therein.
Held : This clause was not binding since not specifically mentioned in
the power of attorney under which the pohcy, was issued. Hence suit
could be brought against several underwriters simultaneously. A
clause requiring suit in the highest court of the State was void as against

179

§ 49] UNASSOCIATED GROUPS [Chap. IV

action is brought the plaintiff could not perform the
condition precedent, action has been allowed directly
against the underwriters, as in a case where the attorneys
have tried to resign and substitute others and the plaintiff
would have to decide at his peril which was the proper
one to sue,^° or where there were no attorneys and no
fund except the individual liability. ^^ The condition
is performed by service on him who is in fact manager
at the time.^^ The attorney under the power to contest
claims has power to appeal. ^-^ Proceedings supplemen-
tary to execution may not be maintained upon a judg-
ment against the attorney in his representative capac-
ity. The plaintiff should sue the underwriters.^^ In

public policy. Blair v. National Shirt & Overalls Co., 137 111. App. 413,
416.

1" American Lucol Co. v. Blanchard, 57 N. Y. S. 14, 26 Misc.
315.

11 American Lucol Co. v. Lowe, 58 N. Y. S. 687, 690, 41 App. Div.
500; Gilchrist v. Transp. Co., 21 Ohio Cir. Ct. Rep. 19; Transp. Co. v.
Gilchrist, 24 Ohio Cu-. Ct. Rep. 165, 167.

1- The pohcy required notice to the attorney and named him. Before
the loss the attorney had resigned, a new one had succeeded him and
defendant underwriter had withdrawTi from the Lloyds. Held:
Notice to the attorney who succeeded is sufficient. Defendant's re-
tirement did not affect his liabiUty on the pohcy. Walker v. Beecher,
36 N. Y. S. 470, 15 Misc. 149.

Notice of loss to those actually attorneys at the time though not the
ones named in the policy cannot be complained of by the underwriters.
Railli V. White, 46 N. Y. S. 376, 20 Misc. 635.

Action was properly brought against one who in fact was the attor-
ney at the time the policy was issued, though an old blank was used
giving the name of a foiTner attorney. Wheelock v. Chapman, 54 N. Y.
S. 327, 34 App. Div. 464.

.Judgment was recovered against the attorneys in fact on a Lloyds
policy and the insured sought to collect from the individual under-
writers. Defense that the power of attorney conferred a joint power
on the three members of the firm and these policies were executed by
only two members of the firm. Held: The true construction of the
power gave u joint and several power to the attorneys. Hence the
pohc-icH W(!r(! wc^ll executed. Unterberg v. Elder, 134 N. Y. S. 242, 149
Aj)p. Div. 647.

" I><)wr(!y V. Bat OH, .^)6 N. Y. S. 197, 26 Misc. 407.

'* Kriegiuan v. Dunphy, 122 N. Y. S. 111(5, 66 Misc. 221.

Under the code one action may bt; Ijrought against all defendants

180

Chap. IV] LLOYD'S INSURANCE [§ 49

subsequent proceedings against the underwriters the
plaintiff must show that execution issued on the judg-
ment against the attorney and that no unexpended
premiums or deposits were found. ^^ Satisfaction of the
judgment against the attorney is a bar to an action
against the underwriters even when by mistake the
plaintiff has taken judgment against the attorney for
only his share of the loss.^^ In case of partial loss, each
underwriter is liable for the face value of his share of the
loss until it is satisfied and must protect himself by
proceeding against the other underwriters for contribu-
tion.^^ A clause in the policy commonly limits the ag-
gregate liability of each underwriter on all policies.^*

severally liable. Isear v. Daynes, 37 N. Y. S. 474; Isear v. McMahon, 37
N. Y. S. 1101, 16 Misc. 95.

Where the Uabihty of each underwriter is expressly hmited to a
fraction of the whole amount and is several and not joint, an action
cannot be brought against all the underwriters but should be brought
against each separately. Strauss v. Hoadley, 48 N. Y. S. 239, 23 App.
Div. 360.

15 Lowrey v. Bates, 56 N. Y. S. 197, 26 Misc. 407.

i« M'Credy v. Thrush, 56 N. Y. S. 68, 72, 37 App. Div. 465.

1^ McAllister v. Hoadley, 76 Fed. 1000 (D. C. — N. Y.); Sumner
V. Piza, 91 Fed. 677 (D. C — N. Y.).

In the action against the individual underwriter, he is entitled to
credit for his proportional share of any sum paid on account of the judg-
ment against the attorney. Cuff v. Heine, 56 N. Y. S. 393, 26 Misc. 859.

1* A clause in a Lloyds policy limited the liability of individual un-
derwriters "on all policies now or hereafter in force" after exhaustion
of the premiums and deposits to twenty-five hundred dollars. In an
action against an underwriter after judgment against the attorney, the
defense was that he had paid out his $2500 ah'eady. Held : Sufficient
defense. The plaintiff is bound by his contract. "There is nothing
more unreasonable in such a limitation than there is in any limitation
an obhgor may see fit to place upon any contract he may see fit to enter
upon. There is certainly nothing more unreasonable in the limitation
than there is in the hmitation placed by law upon the individual lia-
bility of stockholders in ordinary fu-e insurance companies." Burke v.
Rhoads, 79 N. Y. S. 407, 409, 39 Misc. 208.

The clause limiting the liability of each to an aggregate amount on
all policies is a condition subsequent and the plaintiff need not aver
that the amount has not yet been exhausted. Entei-prise Co. v. Mundy,
62 N. J. Law 16, 42 Atl. 1063.

181

§ 50] UNASSOCIATED GROUPS [Chap. IV

In Illinois it was held that the liabilities under one of
these policies may be enforced by a bill in equity.^^
There will probably be fewer of these cases in future
because the statutes of New York, whence most of
these policies came, now make this form of insurance
impracticable.-''

§ 50. Underwriters of Securities

- SjTidicates under^Titing securities almost always re-
cite in their agreement that nothing therein contained
shall be construed as creating a partnership between
them. The courts, however, have sometimes held such
syndicates to be partnerships.^ More often, however,

^' Equity has jurisdiction of a suit against the manager of a Lloyds
association to enforce a policy because the remedy of equity is more
flexible and it may become necessary to compel the manager to collect
the fund from the underwriters out of which this policy is to be paid.
The jurisdiction is concurrent, however, for the plaintiff might have
brought an action at law under the terms of the agreement of asso-
ciation against the manager. The agreement is set forth at length on
pages 4S9 et seq. It provides that the manager shall "appear for the
subscribers in case of any proceedings at law being taken against them
in connection with any pohcy and in their name defend, compromise or
settle the same." If this clause did not appear plaintiff could proceed
in equity joining a few to represent all. There was no provision for
meetings but the subscribers voted by mail for an advisor\' committee of
subscribers to supervise the conduct of the business by the manager
who was appointed by separate powers of attorney. The court refers
to it several times as an association. Notice by a subscriber of inten-
tion to withdraw would not terminate unexpired policies. Warfield-
Howell Co. V. Wilhamson, 233 111. 487, 49.5, 84 X. E. 706.

-" By § 54 of the Insurance Law of New York associations are for-
bidden to do business under any name except the true name of the per-
sons comprising the a.s.sociation. They must also have capital and make
deposits with the State officials hke coiporations. By Chap. 684 of
Laws of 1894 this was made inappUcable to Lloyds doing business 1 Opt.
1892.

Defendants in a proceeding to prevent transaction of business by the
"Peopi(;'s Lloyds" claimed to be assignees of members of such an ixsso-
ciation in existence 1 Oct. 1892 and therefore not prohibited. Held:
That original organization was for the i)ur])Ose of sale and was not en-
gaged in business in fact at the time alleged. People v. Loew, 52 N. Y. S.
799, 23 Misc. 574.

• Sec § 8.

182

Chap. IV] UNDERWRITERS OF SECURITIES [§ 50

they have not had to pass upon the question but have
been able to decide the issue between them by applying
the rules of agency,^ for most of the litigation appears

2 A syndicate promoting a real estate speculation with a view to in-
corporation. The holder of the option made a secret profit for which
the rest sue. Held: "We think it is recognized by the decisions in Illi-
nois as elsewhere that syndicate or association subscriptions to purchase
land or interests in land or perhaps any other purchasable commodity
establish if not a partnership at least such fiduciary relations between
the associates as impose a trust character on funds confided by the others
to the purchasing agent and entitle them to ask in equity an account-
ing and the restoration of money improperly diverted from its intended
purpose." Maxwell v. McWilliams, 145 111. App. 155, 176.

X got up a syndicate of ten to buy some land on mortgage. In fact
X was agent of vendor and was making a secret profit. Also at last mo-
ment one of the original syndicate refused to sign the contract of pur-
chase and X substituted another unknown to the other eight. Held:
Vendor cannot enforce the contract against other members of s3Tidicate.
"These parties not only contracted with the plaintiff but, by implica-
tion of law, contracted with one another. They had chosen their asso-
ciates with whom they agreed to contract. No authority is recognized
by the law under which the parties may be changed without the assent
of the associates." "The contract as it appears with the substituted
associate is not the contract in which the minds of the other associates
met. It is void and cannot be enforced " (p. 223). Also because of the
secret profit of plaintiff's agent (p. 224). Crittenden v. Armour, 80 la.
221, 45 N. W. 888.

A syndicate was formed to acquire securities of certain corporations.
A treasurer was appointed to negotiate notes of the syndicate and handle
its funds. He made a construction contract on behalf of the S5mdicate
that involved liabiUties far in excess of those contemplated by the origi-
nal agreement. A member protested and withdrew and the deal went
through without him, without formal reorganization, and made large
profits. He now claims his share. Held: The construction contract
was rightly excluded. "As before shown, there was no evidence that
I. C. Libby was ever expressly authorized to execute the constuction
contract on behalf of the syndicate and he obviously had no greater
power than that possessed by every other member of the syndicate.
If the syndicate is to be termed a co-partnership, it must be considered
that it was only a special partnership with its scope and purpose ex-
pHcitly defined and Hmited." Hence he had no impUed authority.
Merrill v. Milliken, 101 Me. 50, 56, 63 Atl. 299.

Plaintiff brought an action at law on a contract under which plaintiff
acquired certain property for the Little Kanawha Syndicate. The de-
fendants were the syndicate managers. The court below held the de-
fendants were not liable because they acted as agents for a known prin-
cipal. The court above Held: The complaint alleged a contract in
which the agents expressly bound themselves personally, and so would be
liable. Even if the complaint is not to be so construed, the agents would

183

§ 50] rXASSOCIATED GROUPS [Chap. IV

to have arisen between the sjTidicate managers or agents
and its members. In an important recent case where a

be liable on the theorj^ that they exceeded their authority, for the s>ti-
dicate agreement stipulates that each subscriber shall be liable only to
the sjTidicate managers and then only to the amount of his subscription.
If the members of the sj-ndicate are Uable as partners, then the defend-
ants as members are also hable, and not ha^ong pleaded in abatement the
non-joinder of the other partners cannot raise that defense now. Jones
V. Gould, 200 X. y. 18, 20, 72 X. E. 1071. See Jones v. Gould, 209 X. Y.
419, 103 X. E. 720.

A sjTidicate was formed to float an independent telephone franchise
in Xew York Citj' rnvohnng the securities of several corporations.
Finallj' a voting trust and later a holding company was formed to
carrj' some of these securities. In the prospectus of the holding com-
panj' were false representations for which action was brought. The
issue was whether the holding company or the sjTidicate were hable.
Held: "Those members of the sj-ndicate who authorized the appoint-
ment of the managers who issued the prospectus and those members of
the sjTidicate who, coming into the s^Tidicate after the managers were
appointed, approved of theaction which had already been taken concern-
ing such appointment are Hable for any fraud committed by those man-
agers in thus offering the property of the sj-ndicate for sale." "The
burden of pro%'ing agency rested upon the plaintiff in the first instance;
but when the plaintiff proved that the managers had been appointed
and acted as such throughout the entire life of the sj-ndicate, the infer-
ence would seem to be a fair one that those joining the sjTidicate subse-
quent to the appointment knew who the managers were unless the con-
trary was shown." Lane v. Fenn, 120 X. Y. S. 237, 255, 256, 65 Misc.
336. See Homblower v. Crandall, 7 Mo. App. 220, aff'd 78 Mo.
581.

A syndicate agreement to imderwrite stock pro\aded that the man-
ager should borrow on the security of the stock "in behalf of the sub-
scribers severally in proportion to their subscriptions and by delivery
of the agreement as evidencing the subscribers' several guarantees of
repajTnent of the loan." Also provided that only the manager could sue
on the agreement. He borrowed of plaintiff who now sues an under-
wTiter for the balance of his subscription to apply on the unpaid bal-
ance of the loan. Held: Action maintainable on several grounds.
(1) Reading the two contracts as one, there was a guaranty of pay-
ment that ran to plaintiff. (2) Manager had authority to bind defend-
ant by liis agreement. (3) Though the agreement sa3's the right of
action is vested solely in the manager, he could assign it to plaintiff.
Union Trust Co. v. Van Schaick, 141 X. Y. S. 955, 156 App. Div.
769.

An underwriting agreement authorized the manager of the syndicate
to ple<lgo the underwriting agreement and execute a guaranty. Held:
Thi.s could be done only by all the managers as individuals and not in
finn name (managers were partners). Union Land Co. v. Gwynn,
144 X. Y. S. 110, 121, 158 App. Div. 829.

A subscriber to a syndicate for the reorganization of a corporation

184

Chap. IV] UNDERWRITERS OF SECURITIES [§ 50

creditor sought to hold as a partner one of the mana-
gers of a syndicate on a contract by another, the court
discussed the relations of managers and subscribers.
The defendants were managers of a syndicate formed
to buy one railroad, build another and buy lands along-
side. By the agreement the managers were to do all
acts necessary for that purpose and 'Ho absolutely con-
trol the property so to be constructed or purchased as
fully in all respects as if they were the absolute owners
thereof." On sale of the properties the managers were
to divide the cash or securities pro rata among the sub-
scribers ''from time to time in their discretion." Noth-
ing therein was "to constitute the syndicate subscrib-
ers partners with the syndicate managers or as to each
other." In an action against the managers on a con-
tract made by one of them it was held that the relation
between the managers and subscribers (though fidu-
ciary) was not that of principal and agent. The man-
agers themselves were principals in any contract they
might make. The managers and subscribers were not
partners, for the subscribers had no right in the prop-
erties acquired except to a share on winding up. Hence
the defendants could not set up that they were partners.

brought a bill against the sjmdicate managers for rescission after the
reorganization was completed and tendered back his shares in the new
corporation on the ground that the managers failed to disclose their
interest in the transaction as owners of some of the stock of the original
company. Held: The bill stated a cause of action. Heckscher y. Eden-
bom, 203 N. Y. 210, 96 N. E. 441. In another case arising out of the
same transaction the Federal Coiu"t held that the remedy, if any, was
in the corporation. The plaintiff cannot restore the status quo. Eden-
bom V. Sim, 206 Fed. 275 (C. C. A. — N. Y.).

A trust company that held the secm-ities for the managers was not
trustee for the subscribers to the syndicate agreement but a mere de-
positor or agent for the managers. Agreement construed to authorize
managers to extend the time within which it was to be carried out and
that obtaining consent of subscribers was a precautionary measure only.
Kelly V. lUinois State Trust Co., 215 Fed. 567, 572 (C. C A. — lU.).

185

§ 50] UNASSOCIATED GROUPS [Chap. IV

''The work which the defendants undertook to carry
out was not the prosecution of any general business but
was Umited to a single enterprise. , . . This was not
strictly a partnership though it had many of the fea-
tures of such a relation. It was what is now generally
known as a joint venture rather than a commercial
partnership. The authorities in some of the States
hold that in the prosecution of the venture each party
has the same full power to bind his associates in any
contract in regard to the ventiire that an ordinary
commercial partner would have. We are not now in-
clined to hold that doctrine in its full integrity, but such
ruling is not necessary to the case." There was express
authority from the other defendants to the one making
the contract.^

The conclusion of the court that they were not part-
ners, it is submitted was correct. The endorsement
given to the use of the term joint venture or joint ad-
venture as describing a relation distinct from partner-
ship existing for the purpose of a single enterprise has,
however, little to commend it.'' If the term is meant
to describe the relation of groups of independent con-
tractors caUed herein ''unassociated groups," it may, if
confined in future to cases of that class, prove more ac-
ceptable than the title here suggested, though the latter
seems more characteristic. It is possible, however, that
the relation which the court had in mind was really that
of trust. The statement that ' ' the managers themselves
were principals in any contract which they might make"
suggests it. Indeed, in carefully drawn underwriting
agreements the managers, though not so described, are

» Jonofl V. Gould, 209 N. Y. 419, 424, 42G, 103 N. E. 720. See also
Jonc8 V. Gould, 200 N. Y. 18, 92 N. E. 1071.

* Sec § ;{.

180

Chap. IV] UNDERWRITERS OF SECURITIES [§ 50

really trustees for the subscribers. It seems likely that
as these organizations come more frequently before the
courts, the problems they give rise to will be easily
solved by the principles of the law of trusts and that
they will be classified with the cases included in chap-
ter III.

Analogous to these formal syndicates are occasional
cases relating to those extreme productions of the
speculative mania popularly called ''pools" or ''blind
pools." These are usually most informal arrangements
whereby a group of individuals entrust their money
to some person to be used for some highly speculative
enterprise. In one of these cases the court described
the relation as a quasi partnership.

A promoter interested B in some copper mines. B
neglected to investigate carefully but decided to buy
the property and incorporate the enterprise. He al-
lowed some of his friends to come into the enterprise
and they subscribed $250,000 without knowing any-
thing about the details of the proposition. B gave re-
ceipts as follows: "Subscription of $ — to an under-
writing syndicate for the flotation of certain copper
properties in Ai'izona and New Mexico." The money
was used by B to buy the property, which he conveyed
to certain corporations the stock of which was owned
by a holding company. The stock was so watered that
it could not be sold on the market and B distributed it
to the subscribers. A bill in equity by a subscriber
against B for rescission of the contract and an account-
ing was dismissed because no fraud, only negligence
was shown.

In the opinion the court said: "In the general man-
agement of the business, until the time came for deter-

187

§ 50] UNASSOCIATED GROUPS [Chap. IV

mining how many shares of the stock and what part of
the property the subscribers were entitled to receive,
Burrage was not acting in matters in which he had a
personal interest adverse to the subscribers, in such a
way as to subject him to the strict rule which ap-
plies to those acting for themselves in the business
of others to whom they stand in a fiduciary relation.
In a sense he was acting as their agent and trustee in
matters in which he and they had a common interest.
They were quasi partners with him in the enterprise,
and his relation to them was analogous to that of a
partner to his co-partner. It is not suggested that his
advances to the Arimex Company by way of loans
were not made in good faith, with a view to the best
interests of the corporation."

It is not to be believed, however, that the court by
the words quasi partnership intended to describe a new
form of partnership, but rather to say that the fiduciary
obligation existing between partners also exists between
the men who manage the affairs of the pool and the
other contributors. This, of course, is nothing more than
an application of the principles of agency.^ The word
"pool" has acquired no definite meaning except so far
as it connotes an irresponsible gambling instinct. In
many cases it will be found that the arrangement has
all the elements of a partnership '^ or of a trust. In

5 Runkle v. Burrage, 202 Mass. 89, SS N. E. 573.

* Plaintiff and dofondant formed a pool to speculate in stock in a cor-
poration. Plaintiff was to have the profit on two hundred and fifty
sharcH and if the stock sold above a certain pri(!e was. to share equally
with th(! other in the excess profit on all the shares. Later the scheme
was changed and the j)laiii(ilT was induced to agn^; to a new l)onus on
whif'h h(! got less. Held: lie was induced to assent to the ratification
hy false representations of fact. Whether the relation of ])laint.iff and
*lcfcndants was a t(rchnical partnership or a joint adventure is immate-
rial. T]h- legal rules that ajjply to such an agreement are ])rccisely the

188

Chap. IV] UNDERWRITERS OF SECURITIES [§ 50

some cases it appears only as a relation of debtor and
creditor between the manager of the pool and his
victims.

In bankruptcy proceedings against an individual
trading under the name of Minnesota Grain and In-
demnity Company, certain creditors showed that he
had issued to them certificates entitling them to share
in a pool which he had formed for speculation in wheat.
The court did not have to decide whether the contract
was illegal as a gambling contract or not. As to the
relations of the certificate holders, the court said:

''To the other claimants mentioned in said order
three kinds of certificates and only three were issued
by Norris. In the great majority of cases the certifi-
cates stated that Norris had received a sum of money
therein mentioned in full payment for a number of
shares therein stated in the pool of the Minnesota Grain
and Indemnity Company, in which name Norris was
then doing business. By the terms of that certificate
the company agreed to invest this money according
to its judgment and to pay the certificate holder on the
first of any month his pro rata share of the profits on
hand at that time. The holder could draw the whole
or any part of his money on the first of any month by
giving ten days' notice of his intention so to do, and the
company could cancel the certificate on the first day
of January, 1910, or on the first day of any January
after, by giving thirty days' notice.

''By the second form of contract the Indemnity Co.,
that is, Norris, agreed to pay a dividend of $2.50 a
share on each and every hundred dollars of profit, pay-
same as those that apply to a technical partnership. The relation is
fiduciary and requires the utmost good faith. Dissent on fact of false
representation. Spier v. Hyde, 87 N. Y. S. 285, 288, 92 App. Div. 467.

189

§ 50] UNASSOCIATED GROUPS [Chap. IV

able on the first of each month. This also provided that
an investment could be withdrawn on the first of any
month by giving ten days' notice. It made no provi-
sion for repayment by the company.

''The third form of certificate was similar to the
second except that it did not contain the word 'pool.'

''The relation created by each of these certificates be-
tween the parties was that of lender and borrower.
There is nothing in them to support the contention that
the relation was that of partners. The word ' pool ' is en-
tirely insufficient for that purpose. The person paying
the money had the right to withdraw it at any time.
Norris had the right to return it at stated intervals. The
fact that di^ddends were paid from the profits indicated
only that such was the method adopted for pajdng inter-
est on the money loaned." ^ In most instances, how-
ever, the "pool" will probably be found to be a collec-
tion of independent contracts with a conamon agent. ^

^ In re Norris, 190 Fed. 101, 102 (D. C. — Minn.).

' Action by managers of a pool to buy and sell stock in a mining
company against a member of the pool for the price of his share of the
stock left in the pool. The ^Titten agi'eement provided that if any mem-
ber failed to take up his share of the stock at the request of the mana-
gers, they could sell it for his account and that the pool should con-
tinue for three months. The last purchase was in 1903, and this action
was brought in 1908. Held: The action is upon a written instrument
and the six-year statute of limitations applies. The action was brought
in time. The stipulation about sale of shares on default was inserted
for the benefit of the managers. They were under no dutj' to sell if the
defendant did not instruct Ihem to. They could continue the defend-
ant as a member of the pool and still hold him for the price of the stock.
McMillan v. Whitley, 38 Utah 452, 113 Pac. 1026, 1028. See Hoare v.
Dawes, 1 Douglass 371, and see § 53.

An example of informal "pool certificates," so called, appears in
Smith V. Kinney, 143 Pac. 901, 1126 (Ore.).

An underwriting agreement to bu}' bonds if the manager to whom the
covenants ran did not sell them. It is no defense that they turned out
If) he. worthless. The contract was assignable. The contract was not
an agreement to loan money to the coiporat ion but to insure the sale of
tli(! bonds. Busch v. Strora'berg Co., 217 Fed. 328, 331, 333 (C C. A.—
Mo.).

190

Chap. IV] UNSUCCESSFUL INCORPORATORS [§51

§ 51. Unsuccessful Incorporators

In some States those who attempt to form a corpora-
tion and who so far fail that they do not effect even a
de facto corporation are held not to be partners.^ Since
they have organized for the pm-pose of doing business
for profit, however, and since they are clearly associ-
ated in precisely the same manner in which they would
have been associated if they had been a corporation,
it seems difficult to justify the decisions which relieve
the shareholders from the liabilities of partners. The
argument that they should not be held liable because
they did not intend to assume the liability of partners
is not conclusive, because it has always been held that
while partnership is a relation which must be intended,
the intent is to be inferred from the man's acts and
not from his declarations, and that if the facts show that
he intentionally assumed a relation to which the law
ordinarily attaches the obligations of partners, the
fact that he also intended not to be personally liable
for the debts of the organization or expressly declared
that he was not to be considered a partner will not be
sufficient to prevent the organization from being a
partnership. If unincorporated associations are ever
fully recognized by the courts as in a class intermediate
between partnership and corporation those who at-
tempt to incorporate and wholly fail may properly be
included in that new classification. In the present
state of the law, however, since they clearly do not
belong among the non-profit associations, in States
where it is held that these groups are not partnerships,
they must be treated as an unassociated group.

1 Fay V. Noble, 7 Cush. 189; Ward v. Brigham, 127 Mass. 24.
191

§ 52] UNASSOCIATED GROUPS [Chap. IV

§ 52. Tenants in Common

Tenants in common of property as well as joint ten-
ants may be numerous and may contract jointly with
others without necessarily becoming thereby partners
in a business enterprise.^ The title to the personal
property of a firm at conamon law vests in the firm as an
entity, but title to real estate vests in the individual
partners as joint tenants or tenants in common, so that
the law of partnership is intimately connected with
that of the subject of this section. Moreover, tenants in
common sometimes change their relation into that of
partners, in which case they may or may not con-
tribute the common property as capital of the partner-
ship. It is frequently a difficult question of fact to
determine whether or not joint owners have become
partners.^ Ships are often built by contributions from
a large number who take shares in the ship. In the
absence of further agreement creating a partnership
these owners are merely tenants in common.^ In some
cases an element of association was involved, but as the
trading element in the business was lacking they were
held not partnerships.^ Numerous parties may be ten-

1 A subscription agreement to "take stock" in a hotel running to
the promoter on whicli he agreed to pay seven per cent, was held to con-
template that the shares should represent an interest in the real estate
on which in lieu of rent tlie promoter agreed to pay interest. Near v.
Donnelly, 80 Mich. 130, 130, 44 N. W. 1118.

2 See § 17.

» Thorndike v. Dc Wolf, 0 Pick. 120; French v. Price, 24 Pick. 13;
Mitch(;ll V. Chambers, 43 Mich. 150, 5 N. W. 57; Munsford v. Nicholl,
20 Jolins. Gil (N. Y.).

'' Owners of separate parts of a mining irrigation ditch joined an
association and recorded the articles subject to amendment by a two-
thirds vote. No ])rovision for withdrawal of m(>ml)ers or dissolution.
Certain TturmlxTs fonnaliy withdrew while still owning their part of the
ditf;h and rcjfusfid to pay share! of e,\])enses of ui)keeii as assumed by the
association. The otiier tcinants in common i)roceeded under a statute

1U2

Chap. IV] TENANTS IN COMMON [§ 52

ants in common of grain in an elevator before division
has actually been made.^

By statute in most States, a conveyance not expressly
describing the grantees as joint tenants will create a
tenancy in common. This is to avoid a characteristic
of joint tenancy which is its chief distinction from ten-
ancy in common, viz., the vesting of title in the sur-
vivors on the death of one owner. Though there are
some other distinctions between the two kinds of own-
ership inherited from the mediaeval law of real prop-
erty they are of slight consequence in modern business
transactions. One common characteristic of both forms
of tenancy is that the interest of the owner is an undi-

to enforce a lien for such disbursements. Held: Not intended by the
articles that a member could withdraw. It differs from a commercial
partnership or a joint stock company. The association can only be dis-
solved by two-thirds of the shares or for good cause shown. Strang v.
Osborne, 42 Col. 187, 94 Pac. 320.

Land was bought by subscription, the contracts providing that the
lots should be divided among the subscribers in such way as the majority
should decide. Held : The transactions at the meetings of the subscrib-
ers can be proved by parol. It was but a temporary association. The
fact that the secretary left some memoranda of their doings is immaterial.
Though each subscriber signed a separate contract, they were identical
and are to be construed as one. Under it the majority were constituted
their agents to divide the lots. Selling the preference of choice of lots
at auction was within their power and bound the defendant though he
did not attend the meeting when it was adopted. His presence was not
necessary to vahdate the act of his agent. Morey v. Clopton, 103 Mo.
App. 368, 379, 77 S. W. 467.

A number of miU owners associated themselves by agreement to
construct a reservoir. Their ownership was represented by shares
and under the terms of the contract a majority of shares was
to decide questions as to the flow of the water for use of the share-
holders. Defendants own majority of shares and do not want to pay
to keep up the reservoir, as they own no mills. They let the water
run to waste unless plaintiff will pay for it. Suit for injunction.
Held: Shareholders are tenants in common owning undivided shares.
In exceptional cases like this the court will interfere to prevent waste
by a tenant in common. Under the contract the right to regulate is
for use, not for waste. Injunction granted. BaUou v. Wood, 8 Cush.
48, 51.

^ Tenants in common of grain in elevator. Sexton v. Graham, 53
la. 181, 4 N. W. 1090; Cushing v. Breed, 14 Allen 376.

193

§ 52] UNASSOCIATED GROUPS [Chap. IV

vided share in the whole of the property, which share
is freely transferable, though upon transfer by a joint
tenant his grantee becomes thereby only a tenant in
common with the others.*' All are equally entitled to
the possession of the common property and the courts
will not disturb the possession of one owner on the peti-
tion of the others unless on a bill in equity it appears
that there is danger of irreparable injury to the prop-
erty or its removal from the jurisdiction." One co-
owner has no implied authority to sell the share of the
others.^ There are difficulties about actions at law
between co-owners for conversion by detaining merely,^
but for destruction of the property, ^° or sale of the in-
terest of the others, ^^ an action of tort will lie. ''In
general equity will not interfere between tenants in
common to restrain waste, on the ground that one
tenant in common has a right to enjoy as he pleases,
and that the party complaining may relieve himself at
law by having partition, and the court vdW not act
against the legal title in possession of a tenant in
common. The court will, however, restram a tenant
in common in some special cases of waste and under
peculiar circumstances," ^^ and wall enjoin obstruction

6 Messing v. Messing, 71 N. Y. S. 717, 64 App. Div. 125; Denne v.
Judge, 11 East 288.

^ Allen V. Harper, 26 Ala. 686; Southworth v. Smith, 27 Conn. 355;
Conover v. Earl, 26 la. 167; Swartwout v. Evans, 37 111. 442.

8 Goell V. Morse, 126 Mass. 480; Perry v. Granger, 21 Neb. 579, 33
N. W. 261 (vessel); Henshaw v. Clark, 2 Root. 103. The sale may be
ratifiefl.by the co-owners. Putnam v. Wise, 1 Hill 234.

» Hyde V. Stone, 9 Cow. 230 (N. Y.); Hurd v. Darling, 14 Vt. 214.

'» lic<lington V. Chase, 44 N. H. 36 (melting iron with other iron).

" Goell V. Morse, 126 Mass. 480 (horse); Weld v. Ohver, 21 Pick.
559 (vessel); Hyde v. Stone, 7 Wend. 354 (vessel).

" Such as acts which if continued would amount to a destruction of
the i)rf)jKTfy. A majority of an as.sociation owning a reservoir re-
st raincfl froiM l(;tting the water go to waste without regard to the in-
tercets of the minority. Ballou v. Wood, 8 Cash. 48, 52.

194

Chap. IV] TENANTS IN COMMON [§ 52

by one tenant of the enjoyment of the common prop-
erty by another. ^^ The cases are in conflict as to whether
a tenant in common owes a fiduciary obUgation to his
co-tenants. ^^ Most courts hold that if he buys in an
encumbrance on the common property he must hold it
subject to the right of his co-tenants to share in the
benefit of it on payment of their respective shares in
the cost.^^ On the other hand it has been held that he

13 One member of a farmer's telephone line permitted an outsider
to use it too much and the rest cut off his connection. He sued for in-
junction. Held: Injunction granted. They were not partners because
they did not contemplate profit or a mutual agency of the members.
But tenant in common has right to injunction against obstruction of his
enjoyment of the common property. If they were not tenants in com-
mon, their rights were analogous to it. They have their remedy for the
excessive use by plaintiff, but not by destruction of the property. Han-
cock V. Thorpe, 129 Ga. 812, 60 S. E. 168.

1* Syndicate lands were sold at auction by holders of hens on them
and two groups of shareholders bid. Defendant bought on a secret
agreement to share with certain other shareholders, excluding the plain-
tiff. Several years later when the value had greatly increased the plain-
tiff brought this bill to establish a trust for his benefit on the ground
that whether tenants in common or partners their relation was fiduciary
and defendant could not bid in for himseK and exclude the plaintiff.
The court in a loosely reasoned decision found that even if there was
a fiduciary obligation, it was not violated and plaintiff sued too late.
Starkweather v. Jenner, 27 App. D. C. 348, 361.

Plaintiff organized an association to buy land. He did not disclose
that he was to get a commission on the sale. The purchase was made, but
later the land was returned and some of the consideration recovered.
On dividing it they discovered the plaintiff's commission and deducted
that amount from his share. He sued to recover it. Held: Plaintiff
cannot recover. Whether their relation was that of partners or joint
adventurers the fiduciary obligation of the members to each other was
the same and the plaintiff was not entitled to a secret profit. Church v.
Odell, 100 Minn. 98, 110 N. W. 346.

Tenants in common of a lode who had formerly been mining part-
ners sold out. Held: "There is no relation of trust or confidence
between tenants in common who had been partners in the develop-
ment of lode mining claims which prevents one of them from demand-
ing and receiving a higher sum for his interest in the property than is
paid therefor to his co-owners." Harris v. Lloyd, 11 Mont. 390, 405,
28 Pac. 736.

'^ Rockwell V. Dewees, 2 Black. 613; Hurley v. Hurley, 148 Mass.
444, 19 N. E. 545; Van Home v. Fonda, 5 Johns. Ch. 388; Lloyd v.
Lynch, 28 Pa. St. 419; Downer v. Smith, 38 Vt. 464. See Barnes v.

195

§ 52] UNASSOCIATED GROUPS [Chap. IV

is under no fiduciary obligation to his co-tenants in
buying of them their shares in the common property.
The rule is laid down by Chief Justice Shaw in a Mas-
sachusetts case as follows:

''The court are of opinion that the tenants in com-
mon of a vessel, who are not engaged jointly in the
employment of purchasing or building vessels for sale,
do not stand in such a relation of mutual trust and con-
fidence towards each other in respect to the sale of such
vessel that each is bound in his dealings with the other
to communicate all the information of facts within his
knowledge which may affect the price or value. A dif-
ferent rule may prevail in respect to any contract for
the use or employment of the common property in
which relation perhaps they may be deemed to place
confidence mutually in each other. But in common
cases of tenants in common of a vessel they are inde-
pendent of each other in all matters of purchase and
sale and may deal with each other in the same manner
as owners of separate property. Each may act upon
the knowledge which he has without communicating it.
But aliud est tacers, aliud celare. With this advanta-
geous knowledge, if there be studied efforts to prevent
the other from coming to the knowledge of the truth, or
if there be any through slight, false and fraudulent sug-
gestion or representation, then the transaction is
tainted with turpitude and alike contrary to the rules
of morality and law." ^'^

Tenants in common of a mine who did not become
partners in working it were held entitled nevertheless

Hoiinlrnan, ir)2 Mass. .391, 25 N. E. 623; Turner v. Sawyer, 150 U. S.
.578, .37 L. vil. 1189, 14 S. Ct. 192; Burgctt v. TaUaforo, 118 111. 503, 9
N. E. 334.

»• Matthews V. Bliss, 22 Pick. 48, .52.

190

Chap. IV] COMMON AGENTS [§53

to an accounting. ^^ In some States a tenant in com-
mon may proceed in equity to compel his co-tenant to
contribute to necessary repairs. ^^ Though tenants in
common of personalty at common law have no right
to partition, a court of equity will enforce appropriate
relief. ^^ If the property is severable in its nature, each
tenant may appropriate his own share. ^° A majority
in value of the tenants in common of a vessel may con-
trol the employment of it, but a court of admiralty will
require them to give security for its return to a dissent-
ing minority.^^ It has been held that where the in-
terests of disputing owners are equal and a controversy
as to the use of the ship has been decided, a court of ad-
miralty will order a sale of the share of the owner who is
defeated. ^^ There are numerous cases holding that one
part owner of a ship has power to bind his co-owners in
contract for necessary repairs and supplies, but it would
seem that in all of those cases the owners were really
partners.

§ 53. Common Agents

There are occasional cases of groups dealing through
a common agent which are not properly partnerships,

" Kahnw. Smelting Co., 102 U. S. 641, 646, 26 L. ed. 266; Howard
V. Luce, 171 Fed. 584 (C. C. — N. Y.).

1* Alexander v. Ellison, 79 Ky. 148; Stevens v. Thompson, 17 N. H.
103; Taylor v. Baldwin, 10 Barb. 582 (N. Y.); Munford v. Brown, 6
Cow. 475 (N. Y.); Beaty v. Bordwell, 91 Pa. St. 411; Farrand v. Glea-
son, 56 Vt. 633; Ward v. Ward, 40 W. Va. 611, 21 S. E. 746; McDear-
man v. McClure, 31 Ark. 559.

An action on the case for damages for failure to repair was denied.
It was said the remedy was by partition. Calvert v. Aldrich, 99 Mass.
74, 79; Leigh v. Dickeson, 15 Q. B. D. 60.

19 Willard v. Willard, 145 U. S. 116, 36 L. ed. 644, 12 S. Ct. 818;
Godfrey v. White, 60 Mich. 443, 27 N. W. 593; Barney v. Leach, 54
N. H. 128; Kennedy v. Boykin, 35 S. C. 61, 14 S. E. 809.

20 Fobes V. Shattuck, 22 Barb. 568.

21 The Orleans v. Phoebus, 11 Pet. 178; The ApoUo, 1 Hagg. 311.

22 The Annie H. Smith, 10 Ben. 110; Coyne v. Caples, 7 Sawyer 360.

197

§ 53] UNASSOCIATED GROUPS [Chap. IV

but which do not fall in any of the foregoing classifica-
tions. In one early case a number of men entered into
a speculation in tea. They all employed a certain
broker to buy a lot of tea at a sale of the East India
Company, the lots being in general too large for any
one dealer. The broker issued warrants similar to
warehouse receipts for the proportionate share of each
in the tea and pledged these warrants with the plain-
tiff as security for a loan to carry the tea until it could
be sold. The price of tea dropped, and the broker be-
came bankrupt, as did others to whom the warrants had
been issued. The bankers sued the defendants for the
whole balance of the loan as partners with the others.
The defendants had paid the broker the full amount for
their share of the tea and it appeared that there had
been no joint arrangement about the resale of the tea.
There was a verdict for the defendant and a motion for
a new trial was refused.^

^ Hoare v. Dawes, 1 Douglass 371.

A stock pool was organized with certain brokers as agents who were
to buy the stock and pay for it and then deliver it to members who were
to pay for their shares. Vice versa on sales. When agent and one
member failed the same day and the agent was unable to take stock it
had bought but made no demand on the members, the receiver of the
insolvent member was not liable to the trustee in bankruptcy of the
agent for his share either of the purchase price or of the loss on resale by
the vendors. Re Lathrop Haskins & Co., 216 Fed. 102, 100 (C. C. A.
— N. Y.).

198

CHAPTER V

NON-PROFIT ASSOCIATIONS

§ 54. Definition

The kinds of association considered in this chapter
are very different in their legal status from those we
have previously discussed. Their underlying princi-
ples are derived from the law of agency and not from
the law of partnership. Yet they are true associations
and cannot properly be classified with the trusts and
the joint contractual relations already considered.
Because they are true associations and frequently have
to do with commercial rather than social affairs it is
not always easy to distinguish them from partnerships.
An illustration of this is the stock exchange, a mighty
factor in big business. Its members are actively en-
gaged in business for profit under the auspices of the
exchange, but it is their individual business and not
that of the association. As was said in a leading case,
*Hhe exchange is not a partnership and the plaintiff is
not entitled to the equitable remedies of partners. It
is not a union of persons joining together property,
labor or skill for their common benefit in any pursuit or
business having a communion of profit and loss and
distinguishable by the feature that if earned there is
to be a division of gains. It may be described as an
association of persons engaged in the same line of busi-
ness who have organized together for the purpose of
establishing certain rules by which each agrees to be
governed in the conduct and management of his sepa-

199

§ 54] NON-PROFIT ASSOCIATIONS [Chap. V

rate transactions or business; which is not a partner-
ship." ^ At the other extreme is the social club - with
its constitution and by-laws, — a simple association
that affords few problems for the la'^'^^er, and yet occa-
sionall}' appears in the reports, usually in bitter con-
tests over membership. No one ever contends that
these associations are partnerships. Intermediate
between them come religious societies,^ fraternal or-

1 White V. Bro^meU, 2 Daly 329 (N. Y.).

- Richmond v. Judy, 6 Mo. App. 465, 468.

"Unincorporated societies have long held in this State an interme-
diate position between corporations and partnerships." Liederkranz
Society v. Germania Tum-Verein, 163 Pa. St. 265, 268, 29 Atl. 918.

3 Kerr v. Hicks, 154 N. C. 267, 268, 70 S. E. 468 (convention of
churches); Queen v. Robson, 16 Q. B. D. 137 (Y. M. C. A.).

See a curious dictimi that members of an unincorporated church
are Mable on its contracts as joint promissors or partners. Thurmond
V. Cedar Church, 110 Ga. 816. 36 S. E. 221.

Plaintiff joined a reUgious community called Koreshan Unity and
contributed her property to the common fund, recei\Tng for it a note
signed by the leader of the flock and his assistant "for the Koreshan
Unity." She was to enforce this whenever she decided to leave the com-
munity. Held : An action on the note against members of the colony as
partners cannot be maintained. If it was a partnership, it was not a
trading firm and there was no implied authority to issue notes. It was
not a partnership because not carried on for business purposes, but for
reHgious and social purposes. It was more like a tenancy in common
or club. There was no evidence of authorization or ratification bj- the
other members. Teed v. Parsons, 202 111. 455, 460, 66 N. E. 1044.

In Massachusetts before the Revolution and for some time after
reUgious societies or parishes were coiporations, at first identical with
the touTis themselves, and for a long time even after the Revolution
regulated by statute hke to^^^^s. Within this corporation, called the
"society," was an unincorporated association called the "church," which
partook of the Lord's Supper and performed other religious rites to
which other members of the society were not admitted. Weld v. May, 9
Cush. 181, 184. As a curious exception to the law of corporations an ex-
ecution again.st a to^\'n or territorial parish in Massachusetts could be
levied on the property of individual members thereof. Chase v. Prcnder-
gast, 19 Pick. 564. The law was amended to permit the formation of poll
parishes not on a territorial basis. These were at first corporations but
might also be unincory)oruted associations, which, in the absence of any
restriction in their articles of association, had full power to regulate by
by-law the tenns of their membership. Taylor v. Edson, 4 Cush. 522, 526.

Informal if)n against officers of the Hollis Street Church to determine
the right in funds derived from contributions and other donations not
specifically appropriated and accumulations of interest. The church

200

Chap. V] DEFINITION [§ 54

ders,^ mutual benefit societies '" with and without insur-

of which they were officers was a voluntary association connected with
the reUgious society, which was a corporation. "It may be a question,
then, how such a voluntary association can act, subsist, and enjoy
rights and privileges; or, in other words, how its certainty, identity,
and perpetuity can be known and established. The answer is, that it
subsists and acts, and possesses these qualities, because it is incident
to, and inseparably connected with, and dependent on, a body, which
has certainty, identity, and perpetual succession by an act of incor-
poration. The identity of a church is determined by the identity of
the incorporated rehgious society within which it is gathered ; and such
church, although a merely voluntary association, has perpetuity through
its connection with a corporation which has perpetual succession. If,
therefore, all the members of a church should die, or withdraw, any
number of the members of the same society, forming themselves into
church order, for the celebration of the ordinances, either by the spon-
taneous movement of such members themselves, or under the advice,
and at the caU of neighboring churches, such association would be the
church of the society, identical with the church formerly subsisting;
and upon the orderly choice of deacons, they would be competent to
take and hold property given to the church, and would be the regular
successors of any former deacons; and if need be, might maintain suits
for the recovery of any such property." This capacity to take in suc-
cession was given by statute in 1754. It was not necessary to give
effect to a grant to a deacon of a chm'ch, if he was Uving at the death
of the testator, because he would then take in his personal capacity
and on his death it would descend to his heirs, but the statute was
necessary in order that it might pass to his successor in office; that is,
the deacons were reaUy made a corporation with pei-petual succession
for that pui-pose, although the members of the church were not a cor-
poration. The members of the church were the beneficiaries. This
biU was dismissed, however, because it did not appear to be brought
at the instance of the church or a majority of its male members, but. at
the relation of one member only, which is insufficient in the case of a
private charity. Parker v. May, 5 Cush. 336, 345.

The connection of a congregation with its church corporation may
be severed without loss of identity. Holt v. Downs, 58 N. H. 170, 172.
Many churches in Massachusetts are now unincortjorated. An unin-
corporated rehgious society in Massachusetts could acquire title to
real estate by disseisin because since 1811 such associations had been
given by statute for the purpose of taking, holding and transmitting
property, all the attributes of a corporation. Fu'st Church v. Harper,
191 Mass. 196, 207, 77 N. E. 778.

In the other New England States and New York, New Jersey and
South Carolina churches are usually incorporated. In the remaining
States they are more often unincorporated. Since 1731 in Pennsyl-
vania reUgious associations have been recognized as having associate
and quasi coi-porate existence at law. Phipps v. Jones, 20 Pa. 260, 263.

* Held: Not partnerships. Ferris v. Thaw, 5 Mo. App. 279, 286.
Ash V. Guie, 97 Pa. St. 493, 498.

5 Not partnership. Burke v. Roper, 79 Ala. 138, 142; Laford v.

201

§ 54] NON-PROFIT ASSOCIATIONS [Chap. V

ance features, professional organizations and temporary
public organizations,^ which are plainly not partner-
ships, and the socialistic communities,^ "farmer's tele-
phone lines," ^ trade unions,^ and employers' associa-

Deems, 81 N. Y. 507, 514; Robertson v. Walker, 3 Baxt. (Tenn.) 316,
318.

The contract right of members is not an insurance contract, but in
a sense they are beneficiaries of a trust. Pirics v. First Russian Soc,
83 N. J. Eq. 29, 89 Atl. 1036.

"A mutual benefit association partakes of the nature of a partner-
ship." Gorman v. Russell, 14 Cal. 531, 539.

In one case the court talked as though an insurance order was a
partnership, though with limited liabihty. Hammerstein v. Parsons,
38 Mo. App. 332, 335.

Mutual benefit societies have a twofold character — social or-
ganization, mutual insurance company. Members to whom benefit
certificates are issued acquire property rights, in deahng with which
it is important that courts confine themselves strictly to the terms of
the contract the members have made for themselves. Mukoy v. Su-
preme Lodge, K. H., 28 Mo. App. 463, 471.

Mitchell, J.: "We agree with counsel for defendant that the 'fluid'
state, as he terms it, is the condition of many of these benefit and fra-
ternal associations. Then* organization as well as manner of doing
business is usually so informial that it has been the plague of the courts
to define their character and construe their contracts." Cornfield v.
Order Brith Abraham, 64 Minn. 261, 263, 66 N. W. 970.

A mutual insm'ance society in which each in consideration of a pay-
ment made to him underwrites a policy for a stipulated sum is not a
partnership. Strong v. Harvey, 3 Bing. 304; Redway v. Sweet, L. T.
2 Ex. 400; Gray v. Pearson, L. R. 5 C. P. 568; Andrew's and Alex-
ander's Case, 8 Eq. 176.

« Ostrom V. Greene, 161 N. Y. 353, 360, 55 N. E. 919 (informal asso-
ciation without rules to raise money to build a monument).

' Referred to as a partnership. Goesele v. Bimeler, 14 How. 589, 607.

8 Moore v. Telephone Co., 171 Mich. 388, 399, 137 N. W. 241.
Held: Not a partnership but an "unincorporated association" not
operated for profit but for the convenience of the members. Primm v.
White, 162 Mo. App. 594, 142 S. W. 802.

The organization was not a joint stock company because it issued
no stock. It was not a partnership because it was not organized for
the purpose of engaging in trade or business and no profits were con-
t(!mplated. "An association is defined to be a body of persons acting
together witliout a charter, but upon the methods and forms used by
incori)orated bodies for the prosecution of some common enterprise."
This is broad enougli to cover any such organization not created for
the jjurpose of doing l)usiness at a profit. Branagan v. Buckman,
122 N. Y. S. 610, alT'd 130 N. Y. S. 1106, 145 Ai)p. Div. 950.

» Held: PartiuT.Hhip. Patch Mfg. Co. t^.Capeless, 79 Vt. 1,63 Atl. 938.

Not partnership. Brown v. Stoerkel, 74 Mich. 269, 276, 41 N. W.

202

Chap. V] DEFINITION [§ 54

tions/*' as to which some confusion has arisen, but which
are now generally admitted to be not partnerships.
All of these associations found their rights and obliga-
tions on the same underlying principles and will there-
fore be treated in this chapter together, but so far as
possible the notes will indicate for the benefit of the
practitioner the kind of association each citation em-
bodies.

A recent case illustrates the attitude of the courts
toward a form of association that has lately become
common and which is on the border line between as-
sociations for profit and non-profit associations. The
inhabitants of a farming village started a telephone
exchange, dividing the original cost between them.
Those admitted later were required to pay a fixed sum
for connection and to instal their own outfit. Each
member of the association paid $2 a year for the opera-
tor and a proportionate share of the expense of repairs.

921; Roofing Co. v. International Ass'n, 5 Ont. L. R. 424, 9 Ont. L.
R. 171, 178.

Action by treasurer of a labor union for a libel against the associ-
ation. Held: Partners cannot maintain a joint action for libel unless
it tended to injure the business or credit of the fLrm. By analogy, this
association cannot recover here, since it is not engaged in business.
Stone V. Textile, etc. Ass'n, 122 N. Y. S. 460, 137 App. Div. 655.

1" Bill for dissolution as combination in restraint of trade because
the association had made agreements with the unions regulating wages.
Held: Not a partnership. "If it accumulates property incidentally
in the promotion of its real purpose that does not change the character
of the association." Lindermann Co. v. Advance Stove Works, 170
lU. App. 423, 432; Typothetae v. Union, 102 N. W. 725, 727 (Minn.).

Members of an association of wholesalers who bought goods of a
certain manufacturer received rebates which were paid by the manu-
facturer to the treasurer of the association and distributed by him
pro rata to the members who had pm-chased. Plaintiff not a member
of the association sold some of the same goods and was promised by
the president of the association the rebate. He sued to recover it.
Held: The members of the association were not partners. The plain-
tiff had no right to the rebates. The action of the president was un-
authorized. Midwood V. Wholesale Grocers Ass'n, 20 R. I. 152, 37
Atl. 946.

203

§ 54] NOX-PROFIT ASSOCIATIONS [Chap. V

Each line was entitled to one vote at meetings. As-
sessments were to be levied whenever the treasury
fmids got low. There was a provision for quorum at
meetings. By an amendment of the by-laws, when
a farmer sold his house the purchaser acquired his
rights in the phone and membership in the association
without anj'thing further. The association did busi-
ness and got credit under the name of the Waldron Tel-
ephone Exchange. A neighboring telephone exchange
which was incorporated finally acquired the rights of
what it claimed to be a majority of the members of the
association, gi'V'ing them stock in the corporation in
exchange, and maintaining their telephone connection,
and took possession of the association and its property.
The others brought a bill against it for an accounting.

The court below decided for the corporation. This
was reversed on appeal.

"The by-laws of the association provide for admit-
ting members but not for dismissing them. In a co-
partnership the withdrawal of a member generally
works a dissolution. In a joint adventure which is
neither a partnership nor joint stock company the
fact of the withdrawal of a member, there being no ex-
press agreement on the subject, would not ordinarily
work a dissolution. The practice of permitting the
one who purchased the property and the telephone of
the member of the complainant association to 'step
into the shoes of the man he bought of seems not to
have been intended as a recognition of the right of the
withdrawing member to sell an interest in the associa-
tion, but merely as the receipt of a new member in
place of the one going out.

"As a gonoral rule there can be no partnership where

204

Chap. V] DEFINITION [§54

parties have not by agreement created one. This may
be said also of joint stock companies and indeed of all
joint adventm-es. They are with greater or less particu-
larity agreed to by the adventurers.

"A joint stock company has been defined as an asso-
ciation of individuals for purposes of profit possessing
common capital contributed by the members compos-
ing it, which said capital is commonly divided into
shares of which each member possesses one or more,
and which are transferable by the owners. (Shelford
on Joint Stock Companies, 1. Bouvier's Law Diction-
ary.) The complainant association never had any
capital and never had any shares of stock. As between
the members it was not a corporation, a partnership or
a joint stock association. It was not organized for
profit, neither was it a club or other social or benevo-
lent institution. It was not intended by those asso-
ciating that the withdrawal of a member should work a
dissolution of the association or that any interest should
be transferable except when a member did in fact sell
his home or place of business and his telephone. The
purchaser might, as owner, become a member if he
cared to do so. It was intended and agreed that the
internal affairs of the association should be controlled
directly by its officers rather than by a majority of its
members. There is no reason why these mutual and
innocent agreements and understandings of members
should not be given effect, and we find in them and in
the business carried on no foundation for the claim that
less than all of the members may, by withdrawal or by
an attempted transfer of interests to a third party, com-
pel either a sale of the property of the association or a
dissolution. We are not required to give the association

205

§ 54] NON-PROFIT ASSOCIATIONS [Chap. V

a name indicating its legal status. It is a joint adven-
ture. For purposes of judicial control we regard it as
nearest like a partnership. If there are reasons growing
out of internal dissensions or debts or a failure to secure
the joint benefit sought for by the associates for the
interference of a portion of its members in behalf of all
of them in judicial proceedings, we have no doubt of
the power of the Court of Chancery to investigate and
to grant relief as it would do in the case of a partner-
ship. No such action could be taken by the Hillsdale
Telephone Company, which is not and cannot become a
member of the complainant association. It is recited
in the decree as one of the premises for the release
granted that there has been such dissension among the
interests of Waldron Telephone Exchange as to render
its further continuance improfitable and unsatisfac-
tory under the present conditions, and to require its
dissolution.

"There is perhaps some testimony tending to prove
dissensions, but there is little evidence of dissension
with respect to the internal affairs of complainant asso-
ciation. We have stated the cause of the trouble. It
was found by the trial court that the Hillsdale County
Telephone Co. is the owner of a majority of the stock
and interests of, in and to the Waldron Telephone Ex-
change. We hold it is not such owner; that it is wrong-
fully in possession of the property of the Waldron Tele-
phone Exchange, and should account for its use to the
Association. Those members of the Waldron Tele-
phone Exchange who have formerly transferred their
interests to defendant are for the purposes of this case
regarded as still members of such exchange. We do
not find evidence which convinces us that the members

20G

Chap. V] DEFINITION [§54

of the Waldron Telephone Exchange desire, because of
its insolvency or mismanagement, its dissolution and a
sale of its assets, or that there is such cause as in case of
a partnership would require its dissolution." ^^

It sometimes happens that an association originally
organized for some purpose other than profit departs
from its first purpose and engages in business. In such
cases, when once it is found as a fact that the associa-
tion is in business for the purpose of gain, the rules of
partnership apply. ^^

Organizations for all the purposes above mentioned
to-day are usually incorporated, except social clubs,
stock exchanges and trade unions. When incorporated,
however, they organize under statutes distinct from
those authorizing business corporations. The statutes
regulating incorporated benefit societies are usually
elaborate, but the others are seldom so. The general
law applicable to such corporations differs in many re-
spects from that relating to business corporations. To
a large extent it is not different from the rules applica-
ble to non-profit associations discussed in this chapter
and the cases are frequently cited indiscriminately,
though it has been said by an eminent judge that the
rights of members of a corporation depend on the stat-
utes creating the corporation and such cases are not

11 Moore v. Telephone Co., 171 Mich. 388, 399, 137 N. W.
241.

12 The court was unable to tell on the facts whether an athletic
association was a partnership or not. O'Rourke v. Kelley, the Printer
Corp., 156 Mo. App. 91, 135 S. W. 1011.

A missionary society was held a partnership because engaged in
the sale of rehgious books at a profit. Slaughter v. American Baptist
Missionary Soc, 150 S. W. 224, 227 (Tex.).

Members of a social club carrying on business are not hable unless
they authorized the obUgation. Apparently held hable because they
knew business was being conducted. Fetner v. American National
Bank, 84 S. E. 185 (Ga.).

207

§ 55] NON-PROFIT ASSOCIATIONS [Chap. V

authorities in the case of an unincorporated associa-
tion.^^ The citations in this chapter, however, will be
confined to unincorporated associations except when
otherwise indicated.

The principal differences between the incorporated
and unincorporated non-profit associations resemble
those between partnerships and business corporations,
arising out of the full recognition by the courts of the
entity of the corporation and incomplete recognition
of the entity of the unincorporated association. There
is uncertainty as to the riiles regarding legal title to
property of unincorporated associations, whereas the
law as to the title to property of corporations is clear.

Unincorporated associations apart from statute ap-
pear in court through individual members, corporations
in the corporate name. The members of corporations
are not ordinarily individually liable for its debts,
whereas members of unincorporated associations may
be liable on principles of agency for debts authorized
or ratified, and the remedy of members for deprivation
of rights is properly in equity, and not at law.

§ 55. Admission of Members

Disputes frequently arise as to who are members of
informal associations. The facts upon which these cases
are decided are of great variety.^

" Lurton, J., in Nance v. Busbv, 91 Tenn. 303, 320, 18 S. W.
874.

1 Membership was held a question of fact for the jury. Defendant
had been advertised as an officer. Murray v. Walker, 83 la. 202, 48
N. W. 1075.

Action of slander by voluntary association. Defendant set up that
Bome of flic ])luintiffs who were named as individuals were not mem-
bers and that, tlu^refore, the action failed. Held: Question of fact for
jury wlicther they were members or not. Signing constitution and
paying fee or attending meetings after this was done for him by an-

208

Chap. V] ADMISSION OF MEMBERS [§ 55

The association has, of course, the right to determine
the Hmitations of its membership. On a bill in equity
to compel a labor union to admit two workmen the
court said: ''The very idea of such an organization is
association mutually acceptable and in accordance with
regulations agreed upon, a power to require the admis-
sion of a person in any way objectionable to the society
is repugnant to the scheme of its organization. . . .

other was aU evidence to be considered. Smith v. HoUister, 32 Vt.
695, 704.

The constitution of an agricultural association provided that ex-
hibitors at its fairs should buy tickets making them members. In an
action under a statute for a debt of the association it was held still
open to defendant to show that the tickets though stamped "Member-
ship" were delivered and taken as admission tickets only. Tarbell v.
GiiTord, 82 Vt. 222, 72 Atl. 921.

Ownership of a pew is at least evidence of membership in a religious
society, and when no other than pew holders are able to prove their
membership they may be deemed the beneficiaries. Attorney General
V. Federal St., 3 Gray 145.

When members seceded from a church and built a new one, but later
returned, they were still members of the original church. The original
trustees of the society continued to hold title for it. Peterson v. Sam-
uelson, 42 Neb. 161, 164, 60 N. W. 347.

Withdrawal from the place of worship and estabhshing another is
not necessarily withdrawal from the society. Feny v. Tupper, 74
N. C. 722. See Peterson v. Samuelson, 42 Neb. 161, 164, 60 N. W.
347.

Majority of walnut gi'owers' association formed corporation and
took over its property. Fom* dechned to recognize the corporation
and took in four more and now claim to be the association and entitled
to its property, on the theory that the others have withdrawn. No
formal withdrawal occurred. It was found as a fact below that they
did not withdraw. Held: Plaintiff's case fails because it was found
that defendant had not withdrawn. They clearly did not intend to
part with right m the property. They may have intended to destroy
the association and may have failed, but did not intend to withdraw.
Strong V. Growers' Ass'n, 137 Cal. 607, 610, 70 Pac. 734.

Where a stock exchange reorganized and transferred its assets to a
new association with new constitution and by-laws, membership in
the old exchange did not ipso facto confer membership in the new (p. 37).
One cannot invoke the benefits of membership or incur any habihty
under the rules unless he has consented to them (p. 38). Delay of one
year in claiming membership during (p. 40) which membership became
of value, was laches. Konta v. Stock Exchange, 189 Mo. 26, 87 S. W.
969.

209

§ 55] NON-PROFIT ASSOCIATIONS [Chap. V

The body has a clear right to prescribe the quah-
fications for its membership; it may make it as ex-
clusive as it sees fit; it may make the restriction on
the Une of citizenship, nationality, age, creed or profes-
sion, as well as numbers. This power is incident to its
character as a voluntary association and cannot be in-
quired into except on behalf of some person who has
acquired rights in the organization and to protect such
rights." ^ It cannot be compelled to admit as mem-
bers persons whom it chooses to exclude.^ Stock ex-
change seats, so-called, which frequently have a high
financial value, are in fact merely privileges incident
to membership. Under the rules of the exchange the
value of membership may be realized by transfer to
persons approved by the association but subject to the
regulations of the exchange, which usually provide
that the proceeds must first be applied to pay obhga-
tions to other exchange members.* Though to a cer-
tain extent it is treated as property ^ it is only when the

2 Mayer v. Journeymen Stonecutters' Ass'n, 47 N. J. Eq. 519, 524,
20 Atl. 492.

' " No one can be compelled to join and no society can be compelled
to admit a member against its will fairly expressed at a regular meeting
by a majority vote." Richardson v. Francestown Union Cong. Soc,
58 N. H. 187.

* Hyde v. Woods, 94 U. S. 523, 525, 24 L. ed. 264. The claim of
one who furnished money to buy a seat is subject to the claims of the
other members according to the rules. Thompson v. Adams, 93 Pa.
St. 55, 66.

The proceeds of the sale by the exchange of the seat of an expelled
member belong to the exchange and not to his assignee. Bel ton v.
Hatch, 109 N. Y. 593, 17 N. E. 225.

TIk! following case contra is probably not now law. Sewell v. Ives,
61 How. Pr. (N. Y.) 54, 56.

' Membership in a stock exchange is property passing to a trustee
in bankruptcy. Hyde v. Woods, 94 U.. S. 523, 24 L. ed. 264; Spar-
huwk V. Yerkes, 142 U. S. 1, 35 L. ed. 915, 12 S. Ct. 104; Page v. Ed-
munds, 1S7 U. S. 596, 47 L. ed. 318, 23 S. Ct. 200; Piatt v. Jones, 96
N. Y. 24; re Ketchum, 1 Fed. S40 (C. C. — N. Y.); Odell ;;. Hoyden,
150 Fed. 731 (C. C. — N. Y.). Though not available till claims of other
members are satisfied according to the rules. Re Currie, 185 Fed.

2i0

Chap. V] ADMISSION OF MEMBERS [§ 55

exchange itself has acted and disposed of the seat that
its proceeds become available.^

A somewhat similar situation arises in the cases re-
lating to "farmers' telephone lines." These are fre-
quently informal associations in which membership is
limited by the physical capacity of the service installed.
Hence the question whether membership can be sold
with the farm is important. It is held that the asso-
ciation has a right to control its own membership.^
One who attends a meeting and votes on a proposition,
cannot thereafter dispute his membership.^ A change

263. It also passes to a receiver in supplementary proceedings on execu-
tion against the owner (incorporated exchange). PoweU v. Waldron, 89
N. Y. 328. A pledge of the seat gives an equitable hen. Nashua
Bank v. Abbott, 181 Mass. 531, 63 N. E. 1058. It is subject to an in-
heritance tax on descent of "property" or "estate." Re Hellman, 174
N. Y. 254, 66 N. E. 809. A seat is capital invested in business. (Per
Vann, J., in People v. Feitner, 167 N. Y. 1, 17, 60 N. E. 265.) Mem-
bership in a board of trade or exchange is taxable to the member as
property under a general property tax (corporation). State v. McPhail,
124 Minn. 398, 406, 145 N. W. 108; O'Dell v. Boyden, 150 Fed. 731
(dictum). Held: That the tax statutes did not in fact include it.
Mayor v. Johnson, 96 Md. 737, 54 Atl. 646 ((dictum); People v. Feitner,
167 N. Y. 1, 60 N. E. 265 (dictum). Held: Not property, but a mere
personal privilege, and so not taxable. San Francisco v. Anderson,
103 Cal. 69, 36 Pac. 1034. Held: Not property. Dictum that could
not be seized on execution for debt of a member. Thompson v. Adams,
93 Pa. St. 55, 66.

^ Pledgee not allowed to sell seat. Ketcham v. Provost, 141 N. Y.
S. 437, 441. Dictum that court has no power to compel admission of
purchaser of seat at a judicial sale. People v. Feitner, 167 N. Y. 1, 7,
60 N. E. 265.

^ Dispute between vendor and vendee of farm as to whether phone
went with sale or not. Plaintiff was voted in provided he settle satis-
factorily with vendor. Vendor then assigned his rights to another,
who connected. Held: Plaintiff not a member under the vote. Staples
V. Hobbs, 145 la. 114, 120, 123 N. W. 935. The company had a right
in good faith to control its membership and the purchaser could not
be deemed a member merely by virtue of his warranty deed. CantriU
Telephone Co. v. Fisher, 157 la. 203, 138 N. W. 436, 438; Staples v.
Hobbs, 145 la. 114, 123 N. W. 935. Membership in an association is
not transferable. Moore v. Telephone Co., 171 Mich. 388, 399, 137
N. W. 241; Branagan v. Buckman, 122 N. Y. S. 610, aff'd 130 N. Y. S.
1106, 145 App. Div. 950.

8 Francis v. Perry, 144 N. Y. S. 167, 82 Misc. 271.

211

§ 55] NON-PROFIT ASSOCIATIONS [Chap. V

in the scope of the membership does not affect the iden-
tity of the organization.^

This question has come up in connection with so-
called clubs formed to evade the liquor laws. In these
the limitations on membership are usually nebulous.
As was said in Commonwealth v. Pomphret/" "the
word 'club' has no very definite meaning. Clubs are
formed for all sorts of purposes and there is no
uniformity in their constitutions and rules." A bona
fide club with limited membership owning prop-
erty in common may distribute it to members.
Many clubs furnish food and drink to members for
money. If the main purpose of the club were to
furnish liquor to members on a valuation deter-
mined by the club and any person could become
a member on purchasing a ticket, the organization
itself might show an intent to sell liquor to any one
who offered to buy. "One inquiry always is whether
the organization is bona fide a club with limited mem-
bership, into which admission cannot be obtained by
any person at his pleasure and in which the property
is actually owned in common with the mutual rights
and obligations which belong to such common owner-
ship under the constitution and rules of the club, or
whether either the form of a club has been adopted for
other purposes with the intention and understanding
that the mutual rights and obligations of the members

' A county branch of a national organization was originally com-
posed of delegates fi-om subordinate branches, but by amendment of
tli(! national constitution inembers of local bran(!h(\s were made in-
fiividually mtsinbers of the coimty branch. A bill brought by the county
1 ranch after the change to enforce a trust created for the county branch
bcfor(! th(! change was held good, the organization being the same de-
s\)i\('. the change in mcmbershi)). Munroc County Alliance v. Owens,
•jr> So. ,S7() (Mi.ss.).

I" i;{7 AIa.sH. .004, 567.

212

Chap. V] EXPULSION OF MEMBERS [§ 56

shall not be such as the organization purports to create
or a mere nanae has been assumed without any real
organization behind it." ^^

§ 56. Expulsion of Members

It has been said by high authority that courts have
no jurisdiction to interfere to prevent the expulsion of
a member except on the theory of protection to his
property rights. A man was expelled from a labor
union for apprenticing his son in a non-union shop.
The court (Jessel, M.R.) said: "The first question I
will consider is, what is the jurisdiction of a court of
equity as regards interfering at the instance of a mem-
ber of a society to prevent his being improperly expelled
therefrom? I have no doubt whatever that the founda-
tion of the jurisdiction is the right of property vested
in the member of the society and of which he is un-
justly deprived by such unlawful expulsion. There is
no such jurisdiction I am aware of reposed in this coun-
try, at least in any of the Queen's courts, to decide
upon the rights of persons to associate together when
the association possesses no property. . . . That is to
say, courts as such have never dreamt of enforcing

11 Commonwealth v. Pomphret, 137 Mass. 564, 567. A liquor dealer
formed a partnership association with regular organization in the form
of an unincorporated company. Members paid $1 for a ticket which
was in the form of a certificate of membership. When one got a drink
the ticket was punched for a certain amount up to $1. Held: The
whole scheme was a device to evade the law and defendant was really
selling the liquor. But even if the partnership really owned the stock
it would have more right to sell to members without a hcense than
defendant would have. Rickart v. People, 79 111. 85, 90. Ace. State v.
Mercer, 32 la. 405.

Though the pohce cannot have access to a private clubhouse to in-
terfere with festivities which are not a breach of the peace, when tickets
to a ball were sold pubhcly to any one who sought one and liquor sold
indiscriminately to those admitted, this rule cannot be invoked. Cercle
Frangais v. French, 44 Hun 123.

213

§ 56] NON-PROFIT ASSOCIATIONS [Chap. V

agreements strictly personal in their nature, whether
they are agreements of hiring and service, being the
common relation of master and servant, or whether they
are agreements for the purpose of pleasure or for the
purpose of scientific pursuits or for the purpose of
charity or philanthropy — in such case no court of
justice can interfere so long as there is no property the
right to which is taken away by the person complain-
ing." '

But the rule is not quite so broad as that. ^Miile
it is true that there is inherent power in an associa-
tion - not organized for profit to remove a member

1 The court, however, held that the trade union benefits were such
a property right, but that the restraint of trade purposes made the
union illegal and the contract therefore not enforceable. Rigby v.
Connol, L. R. 14 Ch. Div. 482, 487. Ace. (on principle quoted in the
text) Lambert v. Addison, 46 L. T. Rep. n. s. 20, 24. Bouldin v. Alex-
ander, 15 Wall. 131, 138 (church); Watson v. Gar^'in, 54 :^Io. 353, 378
(dictum church). An allegation that membership in a church is a
valuable right is insufficient. State v. Cummins, 171 Ind. 112, 85 N.
E. 359. The office and salary of lay delegate of a chiuch which wiU
be lost on expulsion is not such a property right. Hatfield v. DeLong,
156 Ind. 207, 210, 59 N. E. 493. Expulsion from a church without
notice. Lurton, J., refused to inquire into it. Xance v. Busby, 91
Tenn. .303, 323, 325, 18 S. W. 874.

So long as there is no infringement of the rights of a citizen and no
conflict with the jurisdiction of the State, church associations should
be free from the interference of courts where there is drav^Ti in question
only the right of such organizations to tr>' and, if need be, expel its
members for the violation of a church ordinance or law. Pounder v.
Ashe, 44 Neb. 672, 63 N. W. 48, overruling 36 Neb. 564, 54 N. W.
847.

"\Mien membership in a rehgious corporation depends on mem-
bership in the congregation or religious association the courts in order
to determine the right to be a member of the corporation must deter-
mine on membership in the congregation; and it must do this by the
rules which the congregation has adopted for its membership. If the
rules make adherence to particular doctrines a condition of member-
ship, the rejection of those doctrines ought to determine a member's
right to remain in the congregation, or if it does not, ipso facto, operate
to exclude him, it would certainly be good reason for his expulsion."
Trustees v. Hcrischell, 48 Minn. 494, 495, 51 N. W. 477.

' MrKano v. Adams, 123 N. Y. 609, 613, 25 N. E. 1057 (pohtical
committee local organization disbanded by the general body); Cheney

214

Chap. V] EXPULSION OF MEMBERS [§ 56

for cause where no property rights are involved, the
method of expulsion adopted must not be arbitrary,^
must conform to any rules previously ^ adopted by the
association applicable to expulsion and must conform
to the elementary conception of judicial fairness. ''No
proceeding in the nature of a judicial proceeding can
be valid unless the party charged is told that he is so
charged, is called on to answer the charge and is
warned of the consequences of refusing to do so." ^
The court will not inquire into the reasonableness of the
ground for expulsion. ''All a court can consider," said
Brett, L.J., "is whether anything has been done con-
trary to natural justice, though within the rules of the
club; whether action of the club was according to its
rules, and whether the decision of the club is bona fide." ^

V. Ketcham, 5 Ohio Nisi Prius Rep. 139, 141; Crow v. Capital City, 26
Pa. Sup. Ct. 411, 422 (beneficial order); Manning v. San Antonio
Club, 63 Tex. 166, 170. Contra, unless the charter expressly so pro-
vides, Evans v. Philadelphia Club, 50 Pa. St. 107. Jessel, M.R., in
Dawkins v. Antrobus, L. R. 17 Ch. D. 615, 620, said obiter that a club
has no inherent power to expel. The point was not considered on
appeal.

* Burke v. Roper, 79 Ala. 138, 144 (church society) ; Hanley v. Elm
Grove Co., 150 la. 198, 129 N. W. 807 (farmers' telephone line —
dictum).

* Where the original rules provided for amendment, it was held that
a social club had the right to alter the rules so as to expel a member.
Dawkins v. Antrobus, L. R. 17 Ch. D. 615, 634, 44 L. T. Rep. n. s. 557,
29 Weekly Rep. 511; Dawson v. HeweU, 118 Cal. 613, 621, 50 Pac. 763,
49 L. R. A. 400.

6 Lord Denman in Innes v. WyUe, 1 C. & K. 257, 47 E. C. L. 255, 262
(plaintiff had used menacing language towards another member. This
was said to be misconduct justifying expulsion). Ace. Grassi v.
O'Rourke, 153 N. Y. S. 493, 498 (employers' ass'n).

6 Dawkins v. Antrobus, 17 Ch. D. 615, 631, 44 L. T. Rep. n. s. 557,
29 Weekly Rep. 511 (social club); Baird v. Wells, L. R. 44 Ch. D. 661,
670; Lyttleton v. Blackburne, 45 L. J. Ch. 219, 222; Lambert v. Addi-
son, 46 L. T. R. N. s. 20. In one case it was said that where there were by-
laws, not unreasonable, they must be followed; where none, the court
will inquire only whether he had reasonable notice, fair opportunity
of presenting his defense in accordance with general principles of law and
justice. Mutual aid society. Von Arx v. San Francisco Verein, 113 Cal.
377, 45 Pac. 685. "Only in case of gross injustice wiU the court inter-

215

§ 56] NON-PROFIT ASSOCIATIONS [Chap. V

Beyond these limits the courts will not inquire collat-
erally into the merits of the expulsion.^ Though it has
been said by respectable authority that there is a differ-
ence between incorporated and unincorporated clubs in
this regard,^ the rules stated for the former seem to be

fere." Engel v. Walsh, 258 111. 98, 104, 101 N. E. 222. A member ex-
pelled and fined for voting contraiy to the wishes of the union was re-
instated. Schneider v. Local Union, 116 La. 270, 40 So. 700.

7 Lamson v. Hewell, 118 Cal. 613, 50 Pac. 763, 49 L. R. A. 400 (Ma-
sonic lodge); Underwriters v. Johnson, 119 S. W. 153 (Ky.) (expulsion
of insurance agent from board of underwTiters. The board had maps and
other property useful in insurance business and the prestige of belong-
ing to it was valuable); Pitcher v. Board of Trade, 121 111. 412, 421,
(expulsion from a board of trade depriving plaintiff of opportunity to do
a profitable business. He is bound by the contract he made in joining);
Osceola Tribe v. Schmidt, 57 Md. 98, 104 (expulsion from a benefit soci-
ety depriving plaintiff of benefits); Farmer v. Kansas City Board of
Trade, 78 Mo. App. 557 (board of trade); Sherry's Appeal, 116 Pa. St.
391, 397, 9 Atl. 478 (fraternal beneficial society); Leech v. Harris, 2
Brewst. 571, 576 (Pa.) (stock exchange).

A Republican ward committee voted to expel certain members who
refused to sign a statement that they supported the fuU RepubUcan
ticket at a recent election. They filed a biU in equity to restrain de-
fendants from hindering them in performance of duties as members of
committee. Held: Bill dismissed. Smith v. HoUis, 33 Wkly. Notes
Cas. (Pa.) 485.

Expulsion of an entire subordinate lodge by a supreme lodge was not
authorized by the by-laws. Holomany v. National Slavonic Soc, 57
N. Y. S. 720, 39 App. Div. 573.

Member of an association filed a mechanic's lien against the property
of another member. He was expelled for not first submitting the dispute
to arbitration. Held : Courts by law do not require submission to arbi-
tration. Hence expulsion invalid. Peremptory mandamus issued. Mil-
ler V. New York Builders' League, 53 N. Y. S. 1016, 29 App. Div.
630.

* Commonwealth v. Union Leagiie of Philadelphia, 135 Pa. St. 301,
321, 327, 19 Atl. 1030, 20 Am. St. Rep. 870, 8 L. R. A. 195. Stock ex-
change. Since it is not incorporated, the cases which have restored a
member who had been obstructed in the exercise of his franchise do not
apply "to a voluntary unincorporated body which comes into existence
by a mutual agreement of the ])ersons forming it and is thereafter
carried on under rules which the body adopts for its government. A
member of a corj^)oration enjoys a franchise, the right to whicli is not
derived from the cor])oration, l)ut is (treated by statute or exists by
prcjscription, and tlu^reforc! (lannot l)e taken away by act of the corpora-
tion, unl(!.s.s th(! i)ow(!r is giv(!n in the charter or the member has been
guilty of a vs\un% the conviction of which would work a forfeiture of all
(;ivil rightH, including the corporation franchise, or has conuuitted acts

216

Chap. V] EXPULSION OF MEMBERS [§ 56

identical with those laid down for associations in the
decisions above cited.

What is meant by saying that the proceedings must
conform to natural justice seems to be merely that
there must be a hearing conducted in good faith of
which the accused has notice and at which he has an
opportunity to be heard, ^ and that any other special
rules of the association applicable to the case shall be
strictly complied with.^*^ Hearings need not be con-

which tend to the dissolution of the corpoi'ation, such as the defacing
of its charter, the obliteration or alteration of its records and other acts
tending to impair or destroy its title to those rights and privileges; in
which case the expulsion of the member is but the exercise of the power
incident to the right of self-preservation. In an unincorporated associ-
ation membership is conferred by the organization itself, and the law
cannot compel it to admit a member nor to restore one who has been
expelled for not complying with the conditions upon which he was made
a member. Wliite v. BrowneU, 2 Daly 329, 357 (N. Y.).

Member of an association filed a mechanic's lien against the prop-
erty of another member. He was expelled for not fii'st submitting the
dispute to arbitration. Held : Constitution and by-laws do not require
a submission to arbitration. Hence expulsion in vaUd. Peremptory man-
damus issued. Miller v. New York Builders' League, 53 N. Y. S. 1016,
29 App. Div. 630.

9 Labouchere v. Earl of WlmrncIiiTe, L. R. 13 Ch. D. 346, 350, 352
(social club); Durel v. Perseverance Fire Co., 47 La. Ann. 1101, 17 So.
591 (fire company); Watson v. Garvin, 54 Mo. 353, 381 (church);
Jones V. State, 28 Neb. 495, 498, 44 N. -W. 658 (rehgious society) ; Lewis
;;. Wilson, 121 N. Y. 284, 288, 24 N. E. 474, 30 N. Y. St. 987 (stock ex-
change. Had notice but did not attend hearing) ; People v. Manhattan
Chess Club, 52 N. Y. S. 726 (social club. Opening sealed letter ad-
dressed to another); "And a proper finding and judgment has been
entered on the facts," Crow v. Capital City, 26 Pa. Sup. Ct. 411, 424
(beneficial order); Cotton Ass'n v. Taylor, 23 Tex. Civ. App. 367, 56
S. W. 553 (labor union); Guinane v. Sunnyside Boating Co., 21 Ont.
App. 49 (instead of attending, he wTote for particulars).

Dictum that hearing is unnecessary when there is no denial of facts
that justify expulsion. Munroe v. Colored Ass'n, 135 La. 894, 66
So. 260.

i« Dingwall v. Assoc, 4 Cal. App. 565, 569, 88 Pac. 597; Rabb v.
Trevelyan, 122 La. 174, 47 So. 455; Harris v. Aiken, 76 Kan. 516, 520,
92 Pac. 537 (live stock exchange); Kopp v. White, 65 N. Y. S. 1017,
1019 (Masonic lodge).

Where the appellate body of a Chamber of Commerce in overruling
a decision of its arbitrators as to the making of a contract, ignored cer-
tain of its own rules regarding the agency of clerks, it was held that this

217

§ 56] XOX-PROFIT ASSOCIATIONS [Chap. V

ducted according to the strict rules of evidence or pro-
cedure of law courts. ^^ Where no rule of the club pro-
\4des for notice the association or its proper officers
may decide how notice shall be given in an}- particular

error was jurisdictional and the chamber was enjoined against expelling
the plaintiff. Bartlett i-. Bartlett, etc. Co., 116 Wis. 450, 467, 93 X. W.
473.

Injimction granted against trial by a judicatory' not constituted ac-
cording to the law of a church. "As an unlawful expulsion would affect
appellant's standing in the community and accomplish an injun' for
which there is no adequate remedy at law." Hatfield v. DeLong, 156
Ind. 207, 211, 59 X. E. 483.

'^Tien officers and members of one association which does not forbid
its members to join another, join another association whose by-laws
forbid its members to belong to another association, they do not forfeit
membership or vacate offices in the first association. Wamebold v.
Grand Lodge, 83 la. 23, 48 X. W. 1069. See § 59, note 3.

11 Derrv- v. G. H. L. M. M. 135 Mich. 494, 98 X. W. 23. May dele-
gate to a committee the taking of testimony and making a report on it,
though expulsion is to be the act of the society and not of the committee.
State V. Medical Soc, 91 Mo. App. 76, S3. '

The fact that some of the board in pursuance of their duties started
the investigation did not prevent their sitting in judgment. Association
may delegate power to expel to a committee, making such action final.
Harris v. Aiken, 76 Kan. 516, 92 Pac. 537 (five stock exchange). Not
bound to confine itself to legal e\'idence. Guinane v. Sunnyside Boat-
ing Co., 21 Ont. App. 49.

XMien the determination of a question is committed to a board or
committee of definite members who act by delegated powers under a
provision that their act shall be by a majority or two-thirds, this means
a majority or two-thirds of all the members. When to a bodj' of unde-
fined numbers wTio act by original not delegated powers, it means a
majority or two-thirds of those who take part. Ivrause v. Sander, 122
N. Y. S. 54, 57, 66 Misc. 601.

Under a by-law providing that the accused is entitled to present his
case, he is entitled to be confronted with all witnesses against him and
hear their testimony. Raych v. Hadida, 130 X. Y. S. 346.

Action by Shakers expelled from the society for their disbelief. There
was an informal hearing by the proper judicial body at which plaintiffs
were heard, but no fonnal written charges (counsel argued it was a
corporation) . Held : Plaintiffs cannot recover on contract for past serv-
ices to the society because by the constitution which they signed this
was expressly renounced, nor for support since exjjulsion because the
constitution bound the society to support members only so long as they
confonno<l to the jirinciples of the society. They cannot recover in tort
for ex])uLsi(jn because the proi)er authority of the society has decided
they do not conform. By the constitution they were made the sole
judges. Grosvcnor v. United Society of BeUevers, 118 Mass. 78,
80.

218

Chap. V] EXPULSION OF MEMBERS [§ 56

instance. ^^ By appearing at the hearing the mem-
ber expelled waives any informality in the notice. ^^
Courts do not interfere with the decisions of such socie-
ties except to see that they have acted according to
their rules, in good faith and not in violation of the law
of the land.^^ By joining the association the member
voluntarily submits himself to its rules. ^^ The con-

12 Labouchere v. Earl of WharncUffe, L. R. 13 Ch. D. 346, 352. Con-
tra. Must be personal service as at common law. Wachtel v. Noah
Widows', etc. Soc, 84 N. Y. 28, 31.

When a society holds its meetings on Sunday, it may serve notice on
Sunday on plaintiff of hearing set for next Sunday to try him on charges
on which he was expelled. The Sunday law does not apply. People v.
Young Men's, etc. Soc, 65 Barb. 357 (N. Y.).

13 Harris v. Aiken, 76 Kan. 516, 520, 92 Pac. 537 (live stock ex-
change) ; Brennan v. United Hatters, 73 N. J. L. 729, 65 Atl. 165 (trade
union. Question for jury) ; Wilhamson v. Randolph, 96 N. Y. S. 644, 48
Misc. 96, 104 (stock exchange); People v. Coachman's Union Benev.
Soc, 24 N. Y. S. 114, 4 Misc. 424, 53 N. Y. St. 560. But offering at a
meeting to answer charges is not a waiver of the right to question the
legality of the resolution ordering trial. Weiss v. Musical Union, 189
Pa. St. 446, 42 Atl. 118.

A member of an association expelled waived right to object to con-
stitution of board appointed to try him by saying he had no objection
before they started in. The vote to expel was irregular but was covered
by a proper vote after the application for mandamus, but before trial.
Held: Mandamus should not issue. P. v. N. Y., 84 N. Y. S. 766, 87
App. Div. 478, aff'd 178 N. Y. 576, 70 N. E. 1105. Munroe v. Colored
Ass'n, 135 La. 894, 66 So. 260.

14 Connolly v. Masonic Mut. Ben. Ass'n, 58 Conn. 552, 20 Atl. 671,
18 Am. St. Rep. 296, '9 L. R. A. 428 (benefit society. Reinstatement
by district deputy after expulsion) ; Mulroy v. Supreme Lodge, 28 Mo.
App. 463, 469 (benefit society).

" Its findings of fact will be upset only if no honest mind could reach
that conclusion on the evidence." Williamson v. Randolph, 96 N. Y. S.
644, 48 Misc. 96, 104 (stock exchange).

"Conclusive upon all questions, including sanity at the time of giv-
ing offense and the trial therefor." Dodd v. Armstrong, 18 Phila. 399
(Pa.) 43 Leg. Int. 270.

Court must presmue that a trial with a view to expulsion by court of
Grand Lodge will be according to natural right and the rules of the order
and wiU not enjoin it in advance. Hershiser v. WiUiams, 6 Ohio Cir. Ct.
147, 149, 4 Ohio Dec. 17, 11 Ohio Dec. (reprint) 76, 24 Cine. L. Bui. 314.

15 Frankhn v. Burnham, 82 N. Y. S. 882, 40 Misc. 566 (Masonic trial
prior to criminal trial. Injunction refused); Crow v. Capital City,
26 Pa. Sup. Ct. 411, 424 (beneficial society).

Member of stock exchange cannot ask reinstatement on the theory

219

§ 56] NON-PROFIT ASSOCIATIONS [Chap. V

stitution and by-laws are a contract with the members. ^^
Hence if his contract of membership involves illegal
provisions, he cannot enforce it by seeking reinstate-
ment after expulsion. ^^

When a member has been deprived of property rights
the courts have been quicker to protect him ^^ and have
inquired into the reasonableness and propriety of his
expulsion, ^^ though they have not always expressed

that the contract for which he was expeUed was a gambling contract.
Lewis V. Wilson, 121 N. Y. 284, 288, 24 N. E. 474, 30 N. Y. St.
987.

If a penalty of expulsion for work on non-union material is a legal
purpose for a labor union, a member can be expelled for failure to abide
by it. Bossert v. United Brotherhood, 137 N. Y. S. 321, 324, 77 Misc.
592.

By-laws of club provide means for expulsion. Held: Every member
has contracted to be bound by it. Wood v. Wood, L. R. 9 Ex. 190;
While V. Damon, 7 Ves. 35.

" Dingwell v. Assoc, 4 Cal. App. 565, 569, 88 Pac. 597; Krause v.
Sander, 122 N. Y. S. 54, 57, 66 Misc. 601 (trade union).

1^ Greer v. StoUer, 77 Fed. 1 (C. C. — Mo.) (member of hve stock ex-
change); FroeUch v. Benefit Ass'n, 93 Mo. App. 383, 391 (trade union,
called combination in restraint of trade).

18 Hanley v. Tel. Co., 150 la. 198, 129 N. W. 807, 808 (farmers' tele-
phone line — dictum); FroeUch v. Benefit Ass'n, 93 Mo. App. 383, 389
(trade union. Death benefit).

19 Clery v. Browm, 51 How. Pr. (N. Y.) 92, 96 (member of a benefit
society expelled for violating its rules); Froehch v. Benefit Ass'n, 93
Mo. App. 383, 389.

Member of a benefit order claimed sick benefit and was expelled for
bringing suit before submitting it to arbitrators according to by-laws.
Held: "We consider that any by-law which provides for the expulsion
of a man from a society in which he has vested property interests is a
violation of the constitution of the Commonwealth." Sweeney v. Hugh
McLaughlin Soc, 14 Weekly Notes Cas. 466, 468 (Pa.).

The New York baseball club was excluded from the national asso-
ciation without a hearing, as required by its constitution. Bill for in-
junction. Held: Memljcrship is property right of which it cannot be
deprived without having done som(^ act that is ground for forfeiture and
notice and trial. "It is said that the association jjossesses no property
it.self. While it may have very littk; proi)erty itself, it is evident it has
Hoinc proyxTty. It ])ays its president a salary of $1800 a year." The
j)rivilcgc of phiyirig against the other clubs is very profitable. "These
are certainly riglits of proyx-rly which are entitled to the j)rotection of
the law." Could not be exjx'llcd wit hout notice or trial, so do not have
to pa.s.s on projjriety of grounds of forfeiture. Metropolitan Base Ball

220

Chap. V] EXPULSION OF MEMBERS [§ 5G

clearly this distinction as a ground for their decisions.
In a leading case the court said that the inherent right
of expulsion could be exercised only for violation of
established rules assented to by the members which
provided expulsion as a penalty for such violation or
for "such conduct as clearly violates the fundamental
objects of the association and if persisted in and allowed
would thwart those objects or bring the association
into disrepute."^'' An unauthorized expulsion is not
validated by a by-law adopted for that purpose after
the expulsion.-^

Members have been ordered reinstated by courts
because the notice to the plaintiff was held to have
been insufficient,^^ because he had been expelled with-
out trial and an opportunity to defend upon specific

Ass'n V. Simmons, 17 Wkly. Notes Cas. (Pa.) 153, 155, 17 Phila. (Pa.)
419, 42 Leg. Int. (Pa.) 520, 1 Pa. Co. Ct. 134.

Courts interfere only (1) if decision is contrary to natural justice.
(2) Rules of the club are not observed. (3) Action is malicious and not
bona fide. Here a member of a labor union entitled to benefits was ex-
pelled for not joining in a strike. The penalty of the by-laws was a fine.
Later, on a strike settlement conditioned on his discharge, reinstated
him and immediately expelled him for conspiracy to injure the asso-
ciation. Held: Not ftona ^c?e and mandamus issued. Otto w. San Fran-
cisco, etc. Union, 75 Cal. 308, 17 Pac. 217, 7 Am. St. Rep. 156.

Member of a labor union expelled for non-payment of an unauthor-
ized fine was restored. Meurer v. Detroit Musicians, etc. Ass'n, 95
Mich. 451, 54 N. W. 954.

Member of a fu'e company expelled for non-payment of dues in-
creased after the association had hquidated its assets was held invalid
because the new by-law seemed unreasonable. Plaintiff held entitled
to share in the property. Engine Co. v. C, 93 Pa. 264, 270. One mem-
ber of a lodge threatened to kill another. Members expelled him. Held :
Not unlawful conspiracy, as they had grounds for expulsion. Moon v.
Flack, 74 N. H. 140, 65 Atl. 829.

20 Otto V. San Francisco, etc. Union, 75 Cal. 308, 314, 17 Pac.
217.

21 Pirics V. First Russian Soc, 83 N. J. Eq. 29, 89 Atl. 1036 (benefit
society) .

22 Fritz V. Muck, 62 How. Pr. 69 (N. Y.) (benefit society); Fisher v.
Keane, L. R. 11 Ch. D. 353, 362 (club); State v. Baseball Ass'n, 61
Wash. 79, 82, 111 Pac. 1055 (no notice in notice of special meeting,
though the member attended).

221

§ 56] NON-PROFIT ASSOCIATIONS [Chap. V

charges,^^ because the by-laws of the association had
not been comphed with -^ or because the charges were
not made in good faith. -^ Where the rules imposed
only a fine, a forfeiture could not be decreed also.^^

Some courts hold that a petition for mandamus is the
correct procedure to obtain restoration to member-
ship." The wTit of mandamus was originally a pre-
rogative WTit directed to a public official. In this
country it has ceased to be a prerogative writ and its
use has been extended from cases involving the duties
of public officials to those of officers of private cor-
porations. Since corporations derive their existence

23 BjTne V. B. U., 74 N. J. L. 258, 65 Atl. 839. "The legal principle
is a general one, affecting aU proceedings which may result in loss of
property, position or character, or any disaster to another, that he shall
first be heard by the board or tribunal considering his case before that
body will be legally permitted to pronounce his condemnation." Lou-
bat V. Le Roy, 40 Him 546, 551.

2^ Savannah Cotton Exchange v. State, 54 Ga. 668, 670 (appeal lim-
ited to jurisdiction of arbitration committee refused); Loubat v. Le
Roy, 40 Hun 546, 551 (a vote requiring two-thirds vote of governing
committee meant two-thirds of whole, not two-thirds of quorum);
Manning v. Klaus, 1 Pa. Super. Ct. 210 (the committee that heard him
practically acquitted him, but the vote of the master barbers' associa-
tion expelled him. Also, acts ta performance of a duty do not justify
expulsion under a by-law providing it for conduct tending to the injury
of fellow members. Sunday closing); Baird v. Wells, L. R. 44 Ch. D.
661, 670 (committee acquitted, then, after a resolution of the club, re-
versed its action); Mesisco v. Giuliano, 190 ]\Iass. 352, 354, 76 N. E.
907 (the language of the court would seem to hmit it to cases where
property rights are violated. Benefit society).

A leader of an orchestra was fined by musicians' union for cutting
prices contrary to by-laws. It appeared that the fine imposed was
under a set of by-laws then re])ealcd by the adoption of a new and com-
prehensive code, though no formal repeal of old set was voted. Held:
This affected the jurisdiction of the order and can be collaterally at-
tacked in this proceeding. Injunction to restore him to order will
is.sue. Bachman v. Harrington, 102 N. Y. S. 406, 411, 52 Misc.
26.

^^ Von Arx v. San Francisco Vcrein, 113 Cal. 377, 45 Pac. 685.

2« Wuchtel V. Noah Widows', etc. Soc, 84 N. Y. 28.

^' Von Arx v. San Francisco Vennn, 113 Cal. 377, 45 Pac. 685
(mutual aid society); Savannah Cotton Exchange v. State, 54 Ga. 668,
670 (exchange).

222

Chap. V] EXPULSION OF MEMBERS [§ 56

from the State, this extension does not justify a further
extension of the writ to cases involving the duties of
officers of unincorporated associations the existence of
which depends solely upon contract. It seems well
settled that it is not available in cases involving rights
arising merely out of private contracts. The better
rule, therefore, is that mandamus is appropriate only
when addressed to officers of corporations ^^ and public
officials, and that a bill in equity for an injunction is
the proper practice in cases of unincorporated associa-
tions.^^ It has been held that where no property rights
are involved an injunction will not issue but the plain-
tiff will be left to his remedy in damages.^" It has also
been said that mandamus will be refused in the dis-
cretion of the court when it is obvious that an irregular
expulsion will immediately be corrected by a proper
proceeding.^^ When properly expelled, a member of a
Masonic lodge could not recover dues paid where no
fraud had been practised on him.^- To include a
claim for sick benefits was held multifarious.^^ For an

28 State V. Cummins, 171 Ind. 112, 85 N. E. 359 (church); Burt v.
Grand Lodge, 66 Mich. 85, 87, 33 N. W. 13 (Masonic lodge); Doyle v.
Bm-ke, 29 R. I. 123, 126, 69 Atl. 362; Mesisco v. Giuhano, 190 Mass.
352, 76 N. E. 907 (benefit society). See query in Hickey v. Baine, 195
Mass. 440, 452, 81 N. E. 201.

29 Mesisco V. GiuHano, 190 Mass. 352, 76 N. E. 907 (benefit society);
Fritz V. Muck, 62 How. Pr. 69 (N. Y.) (benefit society); Fisher v.
Keane, L. R. 11 Ch. D. 353, 362 (club); Pirics v. First Russian
Soc, 83 N. J. Eq. 29, 89 Atl. 1036 (but because it would be in-
equitable to force the reunion of warring factions after an illegal
expulsion, the decree was for distribution of part of fund and not
reinstatement) .

^0 Rowe V. Hewitt, 12 Ont. L. R. 13 (professional hockey club);
Baird v. WeUs, L. R. 44 Ch. D. 661, 670 (social club). "Where the
question presented does not involve tangible and valuable corporate
privileges we cannot interfere in this way." Burt v. Grand Lodge, 66
Mich. 85, 87, 33 N. W. 13.

*i State V. Baseball Ass'n, 61 Wash. 79, 82, 111 Pac. 1055.

32 Robinson v. Yates, 86 111. 598.

33 Mesisco V. Giuhano, 190 Mass. 352, 354, 76 N. E. 907.

223

5 57] NON-PROFIT ASSOCIATIONS [Chap. V

unlawful expulsion the member expelled may sue those
who expelled him and recover damages.^^ "The loss
sustained by the plaintiff in being deprived of the use
and enjojTnent of the property of the society and the
pri^-ileges of membership were proper elements of dam-
ages, as was also the mental suffering of the plaintiff,
caused by his wrongful expulsion and the manner in
which it was effected." ^^ A decision of reinstatement
in a benefit society is not res judicata of unlawful expul-
sion ia an action for damages therefor.^^

§ 57. Exhaustion of Remedies within the Association

The reluctance of courts to interfere in the affairs of
unincorporated associations is shown by their rule that
before a member apphes to a court for rehef he must
have exhausted his remedies within the association.^

^ Schneider v. Local Union, 116 La. 270, 40 So. 700 (trade union);
ConneU v. Stalker, 48 N. Y. S. 77, 21 Misc. 609.

Member of a trade union may have an action against his feUow mem-
bers for conspiracy to expel him unlawful!}'. Campbell v. Johnson,
167 Fed. 102 (C. C. A, — Wash.).

If proved, he is entitled to exemplary damages against those actuated
by mahce. St. Louis Ry. v. Thompsoin, 102 Tex. 89, 113 S. W. 144.

A national union was held Uable for expulsion by a local in disre-
gard of rules requiring procedure for it. Schouten v. Alpine, 137 N.
Y. S. 380, 77 Misc. 19.

Union member fined and expelled sued local council for damages.
Pending the suit he appealed within the order and was reinstated.
Held: Appeal was not a waiver of right to damages. Blanchard v.
Newark Council, 77 N. J. L. 389, 71 Atl. 1131.

^ Lahiff V. Benev. Soc, 76 Conn. 648, 57 Atl. 692, 100 A. S. R. 1012,
6.5 L. R. A. 92.

« CucuriUo V. Societa, 92 N. Y. S. 420, 102 App. Div. 276.

» McCallion v. Hibernia, etc. Soc, 70 Cal. 163, 167, 12 Pac. 114
(members had seceded and declared offices vacant); Engel v. Walsh,
2.58 111. 98, 105, 101 N. E. 222 (member of union wlio had been deprived
of union label was denied relief because he did not set forth the bj-laws
and so did not show that he had exhausted all rights of appeal); Hat-
field V. DeLong, 1.56 Ind. 207, 209, 59 N. E. 483 (church); Rabb v.
Trevelyan, 122 La. 174, 47 So. 455 (bookmaker sued race-track asso-
ciation for slander;; Chamberlain c. Lincohi, 129 Mass. 70, 72 (biU in

224

Chap. V] EXHAUSTION OF REMEDIES [§ 57

This obviously does not mean resort to force.^ When
the only appeal provided by the association is to the
same body that expelled him, the member expelled may
apply directly to the cornet, ^ but in a case where the offi-
cer appealed from was to preside over the appellate
body, the general rule was applied and relief denied
until the expelled member had taken the appeal pro-
vided by the rules of the order.^ In one case the rules
of a benefit association imposed the penalty of expul-

equity by claimants to office to recover property from old officers);
Oliver v. Hopkins, 144 Mass. 175, 10 N. E. 776 (bill in equity by mem-
bers of dissolved lodge to recover funds declared forfeited to Grand
Lodge); Hickey v. Baine, 195 Mass. 440, 452, 81 N. E. 201 (labor union
election contest); MuLroy v. Supreme Lodge, 28 Mo. App. 463 (ex-
pelled member of benefit society) ; Lafond v. Deems, 81 N. Y. 507, 514
(bill for dissolution of benefit society) ; White v. Brownell, 2 Daly 329,
357 (stock exchange); Strempel v. Rubing, 4 N. Y. S. 534 (election
contest); Levy v. U. S. Grand Lodge, 30 N. Y. S. 885, 9 Misc. 633
(election contest); Gebhard v. N. Y. Club, 21 Abb. N. C. 248, 252
(social club); ZiUifax v. I. O. F., 13 Ont. L. R. 155, 8 Ont. W. R. 631
(expulsion).

He need not enforce an appeal conditioned on comphance with
findings below and paying all expenses. Weiss v. Musical Union, 189
Pa. St. 446, 42 Atl. 118.

2 Wlien members of an unincorporated church are excluded from
membership at a meeting which they claim was not properly called,
they must enforce their right to use the church property by an appeal
to the court and not by trespass. Fullbright v. Higginbotham, 133
Mo. 668, 678, 33 N. E. 777.

^ Loubat V. Le Roy, 40 Hun 546, 551 (social club).

* Mead v. Stii'hng, 62 Conn. 586, 27 Atl. 591 (Masonic lodge).

Plaintiff was expelled from order of locomotive engineers for al-
leged violation of a rule. He held insm'ance pohcies in the order as
required by its rules. It appeared that he waived informahties of the
trial by the order. But the court held that there was no evidence at
all of commission by him of the offense of which he was found guilty
by the order, viz., volunteering his advice to railroad on a matter then
in controversy between raihoad and employees. The rule that all rights
of appeal within the order must be exercised was recognized, but ex-
ception allowed here because (1) the officer he last appealed to would
preside at the meeting of the Grand International Division to which
the appeal would be taken; (2) meeting to which appeal might be
taken would be held out of State and at a great distance and not for
two years; (3) if not reinstated by a date six months before that
meeting his insurance would be forfeited. Fritz v. Knaub, 103 N. Y. S.
1003, 1010.

225

§ 57] NON-PROFIT ASSOCIATIONS [Chap. V

sion on any member who resorted to the courts before
taking all appeals provided by the association. A
member retained an attorney and was expelled under
the rule before his suit was actually brought. He was
allowed relief in a suit on his benefit certificate.^ The
appeal provided must be one that can be availed of
as of right and not depend on the discretion or favor of
any one for its exercise.*' When there is no provision
for a tribunal to decide when a member is entitled to
sick benefits, he may appeal to a court." Indeed it has
been laid down as a general rule that whereas in mere
matters of discipline, the member must first exhaust all
rights of appeal within the association, a claim for
money due by vutue of an agreement stands on a dif-
ferent basis and gives a right to resort to the court in
the first instance.^

5 RameU v. Duffy, 81 N. Y. S. 600, 82 App. Div. 496.

^ Rules provided for expulsion after trial by jury. Then aggrieved
could ask a delegate to the next convention to ask the convention to
call the jurv to account. Holomany v. Nat. Slavonic Soc, 57 N. Y. S.
720, 39 App. Div. 573.

A provision for reinstatement is not a right of appeal, nor is a pro-
vision for appeal in a resolution ordering trial, but not in the
by-laws, sufficient. Weiss v. Musical Union, 189 Pa. St. 446, 42
Atl. 118.

Not bound to pursue his remedy within the order when by-laws
provided no remedy and demand for rehef was met with unnecessary
delay. Schneider v. Local Union, 116 La. 270, 40 So. 700.

When the appellate body was at an unreasonable distance and he
was refused access to necessary documents unless he first i)aid his fine
and the offense for which he was ex-pelled was slander of the presiding
officer of the appellate court, he was not obhged to appeal. Corregan
V. Hay, 87 N. Y. S. 956, 94 App. Div. 71.

' Dolan V. Court Good Samaritan, 128 Mass. 437, 439; Kentucky
Lodge V. White, 5 Ky. L. Rep. 418.

» Bauer v. Samson Lodge, 102 Ind. 262, 268, 1 N. E. 571 (cor-
poration); State V. Grand Lodge, 53 N. J. L. 536, 22 Atl. 63
(dictum).

Contra. General rule ai)j)li('d to a suit for sick benefit. Harrington
V. Workmen's A.ss'n, 70 Ga. 310, 342.

Where a by-law of a national as.sociation imder which property
rights of a local were affected provided for suspension without notice,

220

Chap. V] INTERNAL AFFAIRS [§58

§ 58. Internal Affairs

Courts will not as a general rule interfere in the in-
ternal affairs of non-profit associations ^ unless property
rights are involved. As was said of a church, ''Reli-
gious societies are regarded by the civil authorities as
other voluntary associations, the individual members
and separate bodies of which will be held to be bound
by the laws, usages, customs and principles, which are
accepted among them, upon the assumption that in
becoming parts of such organisms they assented to be
bound by those laws, usages and customs as so many
stipulations of a contract between them. It is only by
so regarding the association of individuals or bodies for
religious purposes that the civil authority in this coun-
try can interfere at all, and then it can interfere only so
far as may be necessary to decide upon and protect
rights of property, depending upon the contract be-
tween the parties. And when the contract has been
construed by the parties, the court will, as in other
cases, follow their own construction." ^

Ordinarily courts accept the rules adopted by unin-
corporated associations.^ When an association by its
laws has constituted a tribunal to decide questions
affecting its internal affairs, civil courts are bound by
proper decisions of such tribunal where no property or
civil rights are involved.

"Church tribunals ought to perform their functions

it was unreasonable and void and it was not necessary to appeal to the
biennial convention. Swaine v. Miller, 72 Mo. App. 446.

Contra. Where only membership rights involved. O'Brien v.
Musical Union, 64 N. J. Eq. 525, 54 Atl. 150.

1 Randolph v. Southern Beneficial League, 7 N. Y. S. 135, 139.

2 First Presbyterian Church v. Wilson, 77 Ky. 252, 256. Ace. Allen
V. Roby, 67 So. 899 (Miss.).

3 Alexander v. Bowers, 79 S. W. 342 (Tex. Civ. App.) (church).

227

§ 58] NON-PROFIT ASSOCIATIONS [Chap. V

honestly, impartially and justly, with due regard to
their constitutional powers, sound morals and the rights
of all who are interested; but if tyranny, force, fraud,
oppression or corruption prevail, no civil remedy exists
for such abuse except when it trenches upon some prop-
erty or civil right." Hence a bill to declare void the
union of two Presbyterian churches was dismissed be-
cause the church as such owned no property.^

A dispute over the appointment of a pastor grew out
of the split in the Evangelical Alliance. It was held
that the question should be settled by the proper tri-
bunal of the association; if there was no such tribunal,
it was a deficiency that could be supplied only by the
association. " Courts of equity, while they may supply
remedies not available in legal actions, have no jurisdic-
tion to supplement the powers of purely voluntary as-
sociations when through improvidence they in practice
are found inadequate. To concede that voluntary
associations cannot govern themselves might present
a convincing argument against allowing them at all to
exist, but by no means affords a justification for placing
them under the guardianship of the State through the
courts." ^ Some courts have insisted on the right to

* FusseU V. Hall, 223 111. 73, 77, 84 N. E. 42. Ace. Landis v. Camp-
beU, 79 Mo. 433, 440.

6 Powers V. Budy, 45 Neb. 208, 63 N. W. 476. Ace. Hatfield v.
DeLong, 156 Ind. 207, 210, 59 N. E. 483.

An Episcopal clergyman was tried in a church court and convicted
of adultery and remov(;d from office. He sought certiorari in civil
court.s addressed to the ecclesiastical court on tlu! gi'ound that it was
not legally constituted and for irregularities of procedure and that it
had no jurisdiction of offenses that were civil crimes. Held: The church
courts for the pui7)ose of church discifjline have jurisdiction of offenses
against tlu; civil law (p. 409). Civil courts have no jurisdiction by
certiorari to require the i)roduction of church records to correct errors
in them when the suhjec^t matter of the judgment is of ecclesiastical
cognizance. On such suhjec-ts its judgment is co.ichisive (p. 417). A
niiiiister has no jjroperty right in liis olhce for the purpose of earning

228

Chap. V] INTERNAL AFFAIRS [§ 58

determine whether the court of the association was
acting within its jurisdiction. These decisions were,

a salary (p. 417). When the subject matter is of ecclesiastical cogni-
zance and the party accused is properly before the court, it is for the
court to decide whether or not it is properly organized to hear the mat-
ter before it. Civil courts cannot review that determination (p. 419).
Satterlee v. Williams, 20 App. D. C. 393.

A minister sought to enjoin a trial of him appointed by the bishop.
Held : A minister as a member of a church is bound by all its rules and
laws, and if he does not approve of them his only remedy is to withdraw
(p. 533). Civil courts will interfere with decisions of church judicatories
only when rights of property or civil rights are involved. They will not
review the decisions of such associations upon ecclesiastical matters
merely to ascertain then* jurisdiction (p. 537). Dissent on ground that
question of jurisdiction is always open in civil courts. Chase v. Cheney,
58 111. 509.

A spht in a church denomination resulted in the appointment of two
rival pastors for the same church. One with some of his adherents
brought a bill in equity to enforce their right to use the church. The
issue depended upon the validity of the calhng of a general conference.
This depended on whether under the laws of the church the last preced-
ing general conference could delegate to its Board of Publication the
selection of the place for the next. Held : The power whether legislative
or executive is one that can be delegated. The conference was properly
called and hence the plaintiff was properly appointed pastor (p. 433).
He may sue to enforce his right because it involves his salaiy. His co-
plaintiffs may sue to enforce their rights to use the church (p. 434). On
such a question the decision of a church judicatory is final (p. 428).
Schweicher v. Husser, 146 111. 399, 34 N. E. 1022.

Same issue decided the same way on the ground that the general
conference was the supreme judicial, executive and legislative head of
the denomination and that its decision on an ecclesiastical matter should
not be set aside by the court. Auracher v. Yerger, 90 la. 558, 567, 58
N. W. 893.

The decision of a Catholic bishop as the judicatory of the Roman
church must be followed by the civil courts. Bonacum v. Harrington,
65 Neb. 831, 834, 91 N. W. 886.

A minister was tried and expelled by one church court, which sen-
tence was reversed on appeal. Held: The decision of the highest church
court must prevail. Dieffendorf v. Reformed Church, 20 Johns. 12,
14.

A pastor sued for his salary. The issue was whether he had been
properly dismissed or not, and this had been decided against him by the
church judicatories. Held: The church court had jurisdiction of the
question. " If I were less certain than I am as to the question of jurisdic-
tion, I should give gi'eat weight to the decisions of these bodies." "Hav-
ing thus recorded the conclusion that this was an ecclesiastical matter
and that the church judicatories had jurisdiction of it, we cannot inquire
whether they have proceeded according to the laws and usages of their
church nor whether they have decided the matter correctly" (p. 561).

229

§ 58] NON-PROFIT ASSOCIATIONS [Chap. V

however, mostly in actions by ministers for their sala-
ries, and so a property right was in fact involved.^ A

The contract made by a pastor of the church by accepting a call is termi-
nable only by mutual consent or in the mode specified in the constitu-
tion and usages of the church. Connett v. Reformed Chiu-ch, 54 N. Y.
551.

A burial right was conditioned on the holder being in communion
with the Roman CathoUc church. Held: The decision of the proper
church tribunal was final on this. McGuire v. Trustees, 54 Hun 207, 219.

The General Assembly of the Presbyterian church is not a corpora-
tion. It imites in itself the legislative, executive and judicial functions
of government. It is not subject to the correctional powers of the
court other than as far as necessary to estabhsh its identity. When
it proceeded in good faith to dissolve certain synods the court can-
not re-examine its conclusions. Comm. v. Green, 4 Whart. 531, 598
(Pa.).

A pastor sued to enforce his appointment. The issue was as to the
calling of the annual conference of the EvangeUcal AUiance. Held:
The appointment of the place of the next annual conference was an ad-
ministrative function and could be delegated (p. 548). Under the disci-
pline of the church, pastors are appointed by the conference and the will
of the majority of the church does not control (p. 552) . The property of
the church belongs to those who adhere to the original organization and
not to those who have organized an independent one (p. 551). Krecker
V. Shirey, 163 Pa. St. 534, 30 Atl. 440.

A pastor has no property rights in his salary, in the>absence of express
contract, that entitles him to contest in the civil courts the decision of
church tribunals in matters of church discipline. "It may be that the
proceedings were irregularly conducted measured by the disciphnary
standard ; that is a question for the ecclesiastical or church revising au-
thority and not for the courts." Travers v. Abbey, 104 Tenn. 665, 669,
58 S. W. 247.

The decision of the regular tribunals of a grange as to a matter of
internal disciphne (validity of admission of plaintiff) is binding on the
courts. Non-observance of a by-law of the State grange by locals with
knowledge of certain officers of State grange does not abrogate it.
Yeaton v. Somersworth Grange, 77 N. H. 332, 91 Atl. 868.

" A minister sued for a balance of salary, claiming that he had been
dismissed by a body which had no jurisdiction of the matter. Held:
The i)latform which was the basis of the general organization of the
church being silent on the point and it depending on usage, that ques-
tion of fact was properly submitted to the jury. Gibbs v. Gilead Soc,
38 Conn. 153, 178.

In an action by a dismissed rector for his salary the civil courts will
inquire into the jurisdiction of ecclesiastical tribunal. Perry v. Wheeler,
75Ky. .>11.

A Catliolic pri(!Kt sued for his salary. The issue was whether he had
been dismiHsed. Held: The decision of the church councils on such
matters are not concluHiv(^ until sanctioned by legal adjudication in a
court of law. It is essential that their proceedings be so far formal as to

230

Chap. V] INTERNAL AFFAIRS [§ 58

provision in the constitution and by-laws of a benefit
society was held void because it purported to make
final the decision of the arbitrators on the whole ques-
tion of liability.^

Although in general, as in the expulsion cases above
mentioned, the courts refuse to act in contravention
to the regulations of the association to which the mem-
ber has bound himself voluntarily,^ they have shown a

enable the court to judge whether they have acted with some regard
for the rights of the accused. Query, if incorporated. Thompson v.
Cathohc Congregational Soc, 7 [Pick. 160, 164. But when the salary
of a priest depends on incumbency and not on contract it is not a prop-
erty right enforceable in civil courts. Hynes v. LiUis, 170 S. W. 396
(Mo. App.).

A minister dismissed by action of his congregation sustained by the
General Assembly brought a bill in equity against the General Assem-
bly to declare its action void on the ground that the procedure on appeal
was not in conformity to church law and so void. Held: There was no
error in a finding that the procedure before the General Assembly was in
violation of church law. Wallace v. Trustees of General Assembly, 201
Pa. St. 292, 296, 50 Atl. 762.

But when the tribunal of the association has itself decided the ques-
tion of jurisdiction and that decision depends upon an interpretation
of the organic law of the association, courts should accept it. See
§61.

7 Daniher v. Grand Lodge, 10 Utah 110, 123, 37 Pac. 245.

Injunction against arbitration committee of an exchange was denied
because the agreement to arbitrate involved in assenting to its constitu-
tion was void under a statute making all agreements to arbitrate revok-
able. Heath v. N. Y. Gold Exchange, 38 How. Pr. 168.

An agreement to appeal to the Grand Lodge contained in the by-laws
of a benefit society held not binding so far as it relates to property in-
terests. Poultney v. Bachman, 10 Abb. N. C. 252 (N. Y.).

^ A statute provided for calHng meetings of "parishes" or "rehgious
societies." A lease had been authorized at a meeting called otherwise but
according to by-laws. Held : Records of organization and since indicate
that they have regarded themselves as a body of proprietors of the house
of worship and not a parish or religious society. They call their meetings,
meetings of stockliolders. Hence the by-laws and meeting and lease
were vahd. {Semble private rather than public organization.) Cogs-
weU V. BuUock, 13 Allen 90, 92.

A by-law of a national order required a report on amendment to be
made at next meeting. In fact, the committee was continued from time
to time and finally reported at subsequent meeting where report and
amendment were adopted. No question was raised as to right to thus
act. Local lodge divided on issue. Held: The essential spirit of the
article about amendment had been observed. Cannot say action in-

231

§ 58] NON-PROFIT ASSOCIATIONS [Chap. V

tendency to depart from this and consider the reasona-
bleness of the regulations when questions of property
are involved.^ WTiile thej^ profess to refuse to decide

valid by reason of non-compliance with Art. 30. The changes were not
so radical as to be bevond the power of national bodj'. Goulding v.
Standish, 182 Mass. 401, 404, 65 X. E. 803.

A court will inquire into questions of doctrine onlj' to decide a ques-
tion of propertj' of a church. Hendrickson v. Shotwell, 1 X. J. Eq. 577,
671, 682.

A Mason was indited for Hbel. He sought to enjoin a Masonic trial
to be held before his criminal trial for reason that he would be forced to
disclose e\"idence, etc. Held: Plaintiff voluntarily submitted himself to
rules of the order and must stand trial accordmg to those rules. It
seems to be done in good faith. He has no property right of which he is
being deprived because his only right is to enjoy the property of the
order while a member in good standing. Franklin v. Bumham, 82
N. Y. S. 882, 40 ^Hsc. 566.

BiU alleged that a minoritj' of local body voted that aU members
who did not contribute 81 a year towards building hall by Grand Lodge
should not be permitted to attend meetings. Answer, that lodge
simply obeyed an order of Grand Lodge according to its rule. Held:
Bill dismissed. Bauer v. Seegar, 2 Weekly Xotes Cas. (Pa.) 242.

Injimction granted to restrain defendant from occupying chair at
meetings. There was a rule of the lodge as to one under charges. He
had been tried, but the supreme council ordered a new trial. Held :
This was aU regular and he is still under charges and not entitled to
occupy the chair. Courts have jurisdiction to enforce rules of these
societies. Potter v. Search, 7 Phila. (Pa.) 443, 449. See People v.
Chicago Board of Trade, 80 111. 134, 137 (which held that the same rule
apphes to corporations).

9 See Littleton v. 1. O. U. A. M., 98 Md. 453, 461, 56 Atl. 798 (where
the rule of a benefit society was apphed).

Members of a board of fire unden\Titers established rules regulating
the number of soMcitors who might be emploj'ed by members and who
they should be, etc., practically restraining the business of members.
Certain members sought to enjoin enforcement of the penaltj' of viola-
tion of these regulations, viz., no intercourse with other members.
Held: ^^'he^e there are property rights, as here, equity will interfere
when by-laws are a departure from the object of the society, violate
the public policy of the State or are unjust or unreasonable. This
was illegal as in restraint of trade. Huston v. Rentlinger, 91 Ky. 333,
344, 15 S. W. 867. Ace. Rudolph v. Soutliem Beneficial League, 7
N. Y. S. 135, 139 (transfer of all its property by its officers).

Bill to recover possession of property of a local lodge confiscated by
grand lodge under proceedings authorized by its by-laws. Defendants
were members of local body. Held: Members bound by such agree-
ment only if it clearly appears that they assented to it. It does not
appear that by-laws of local lodge adopted by-laws of gi-and lodge.
But even if they did, it would not be binding. Cannot make a binding

232

Chap. V] INTERNAL AFFAIRS [§ 58

contested elections to office as such,^° when one claiming
to be an officer seeks possession of property of the asso-
ciation held by a rival claimant the court has to decide
which is the officer de jure in order to decide who is
entitled to the property. ^^ Ordinarily the vote of a
majority of those attending a meeting is decisive.^^ No

agreement in advance to submit to arbitration. May revoke up to
last moment. Courts of justice cannot be caUed on to enforce decrees
of these seK-created judicatories. Austin v. Searing, 16 N. Y. 112, 123,
69 Am. Dec. 665.

By-law of pilots' association that one refusing to go on a boat in
turn shall be considered on sick leave and have sick leave pay is not so
unreasonable that it can be set aside. Marshall v. Virden, 19 Fa. Sup.
Ct. 245, 251.

" One claiming to be the legitimate successor of Dowie as head of
his church sought an injunction against another making the same
claim. Held: As no property rights are 'involved, equity will not in-
terfere. Lewis V. Vohva, 154 111. App. 48, 51.

Quo warranto to inquire into the vaUdity of the election of deacons
of a church was dismissed because they were not officers of the church
corporation but of an unincoi'porated association over the election of
whom the courts have no control.' The fact that they are by statute
ex-officio trustees of the corporation does not give the State the right
to interfere (Cooley, C. J.). Attorney General v. GeerUngs, 55 Mich.
562, 22 N. W. 89.

Plaintiff sues to enforce his right to office of Grand of Or-
der against another claimant. Contested election. Did not appear
any salary attached to office. Held : Courts will not interfere with in-
ternal affairs of unincorporated associations unless act complained of
was a violation of rules of order and plaintiff was thereby deprived of a
civil or property right. Gaines v. Farmer, 55 Tex. Civ. App. 601, 119
S. W. 874, 877.

11 Petition for mandamus by new treasurer to compel old treasurer
of unincorporated social body to turn over books. Held: Denied be-
cause not duly elected. Notice of meeting not given to some of du-ectors
and the term of office of directors had not commenced. Grand Rapids
Guard v. Bulkley, 97 Mich. 610, 57 N. W. 188.

Where an officer of a religious society is duly appointed for no defi-
nite term, the presumption is that he remains in office tiU competent
evidence of his due removal is given, and whoever claims it on that
ground must estabfish it. Hendrickson v. Shotwell, 1 N. J. Eq. 577,
600. Ace. Tanner v. Ranken, 89 N. Y. S. 770, 44 Misc. 488.

Election at a special meeting of which all were not notified was held
illegal in a suit by an officer to recover possession of paraphernaha.
Goller V. Strubenhaus, 134 N. Y. S. 1043, 1049. Ace. Whitty v. McCar-
thy, 20 R. I. 792, 36 Atl. 129 (fraternal order).

1^ Goesele v. Buneler, 14 How. 589, 608 (communistic society);

233

§ 58] NON-PROFIT ASSOCIATIONS [Chap. V

meeting can bind a majority of a subsequent meeting by

Bouldin v. Alexander, 15 Wall. 131, 140 (church); Foreman v. Fayer-
son, 135 La. 221, 65 So. 131. Hetchett v. Mt. Pleasant Church, 46 Ark.
291, 295 (injunction against preacher dismissed by majority vote).
Trustees v. Proctor, 66 111. 11 (injunction refused where majority voted
to retain preacher). Turpin v. Bagby, 138 Mo. 7, 10, 39 S. W. 455
(trustees elected by majority faction in Baptist church retained prop-
erty). Fau- V. First Church, 57 N. J. Eq. 496, 501, 42 Atl. 166 (major-
ity of Methodist church voted sale of edifice). Conference v. Allen,
156 N. C. 524, 72 S. E. 617 (removal of trustees of a Congregational
church). Windley v. McChney, 161 N. C. 318, 77 S. E. 226 (majority of
Baptist church adopted " discipline of a certain conference." No change
in doctrine); Henry v. Deitrick, 84 Pa. St. 286, 294 (church); Horton v.
Chester Baptist Church, 34 Vt. 309, 317 (agreement to compromise a
wiU).

By the constitution of an unincorporated church the management
of its affairs was vested in the "whole" congregation. Held: This
meant a meeting at which all had an opportunity to attend, but not
that unanimous consent be requisite. The chm^ch being congrega-
tional in pohty and independent could act by a majority and so amend
its constitution (at least if it worked no change in the purpose of the
organization) and may incorporate. Duessel v. Proch, 78 Conn. 343,
349, 62 Atl. 152.

Majority excluded by a minority are not seceders if they organize
separately. Bates v. Huston, 66 Ga. 198, 200.

Where a church is strictly independent questions of doctrine or
form of worship are to be decided by a majority of members or by any
local officers or tribunal created by the church for the purpose. Where
elders are elected for that purpose, instrumental music cannot be in-
troduced in the service against their will without some action by the
majority in accordance with the rules. Hackney v. Vawter, 39 Kan.
615, 629, 18 Pac. 699.

A church which had never formally adopted any confession of faith
but for years had sent delegates to a District Synod adhering to the
belief of one sect of denomination had a right to elect a pastor who ad-
hered to the behef of the other sect and a minority could not restrain
him from acting as such or from using the church property. Ehren-
feld's Appeal, 101 Pa. St. 186.

Where majority rule was agreed upon in the constitution which
united two religious congregations a minority cannot thereafter claim
title to any part of the real estate owned by the association, but hav-
ing been allowed to build a separate chvu'(;h on a part of the land and
occupy it for years the original congi-egation are estopped in equity to
assert their title. St. Paul's Church v. Hower, 191 Pa. 306, 311, 43
Atl. 221.

At the close of the Civil War a minority of a congregation for political
rca-sons excluded the majority. The issue was on joining the North or
South branch of \\w. Presbyterian church. Held: Tlie minority is not
th(! church and could not arl)itrarily exclude the majority or act as the
church therejiftcr. DcadcTick v. Lampson, 58 Teim. 523, 534.

A majority of a lodge formed a new one. Then voted most of funds

234

Chap. V] , INTERNAL AFFAIRS [§58

irrepealable acts or rules of procedure. ^^ The meeting
must follow due notice in accordance with the by-laws. ^^
The common parliamentary rules in use by deliberate
assemblies in this country should be resorted to, in the
absence of any made by the association itself, in consid-
ering the regularity of its proceedings.^^ If the associa-

of old as back salaries to secretary and treasurer, who later loaned it to
new lodge. Held: Majority cannot divert funds of lodge. Action of
lodge in paying bills will not be scanned closely but will be given great
weight if done in good faith. Here it was a mere subterfuge to divert
funds. Bachman v. Hofman, 104 111. App. 159, 183.

An oral vote of which no record is kept is insufficient to ratify an un-
authorized conveyance of property. Hubbard v. German Cathohc Soc,
34 la. 31, 39.

1' Richardson v. Francestown Union Cong. Soc, 58 N. H. 187, 189.
Ace. Goesele v. Bimeler, 14 How. 589, 608, and Smith v. Nelson, 18 Vt.
511, 550.

In a church having a congregational form of government two fac-
tions arose over questions of doctrme. At a meeting of the church one
faction agreed to sell its interest in the church to the other. At a later
meeting before this was done a majority of the congregation voted to
rescind the former action. Held: The majority rules and the second
meeting had power to set aside the former action. Such vote was a good
defense to action on the contract. Action need not be by a majority of
all the members, a majority of those attending is sufficient if all have an
opportunity to attend. Bottom v. Tinsley, 134 S. W. 833.

^* When the canon of an Episcopal church required notice during
divine service of an election of vestrymen, a notice given at a service
held by one claiming to have been elected rector, which service was held
at an ususual hour, is insufficient. Dahl v. Palache, 68 Cal. 248, 9
Pac. 94.

Action for salary by a dismissed pastor against trustees of a church.
Held: He cannot object to the notice given of the meeting that dis-
missed him because he advised that it be held, gave notice of it and
participated in it. Helbig v. Rosenberg, 86 la. 159, 164, 53 N. W.
111.

A church society was composed of pew holders. Though the con-
stitution required fourteen days' notice of a meeting the rule had not
been comphed with for many years. It was not complied with in call-
ing a meeting which voted to move the church building to another town.
Held: The vote as taken was invalid. Query, if a vahd meeting could
have authorized the change against the wiU of pew holders. Small v.
Cahoon, 207 Mass. 359, 364, 93 N. E. 588.

^^ An appointment by a religious society of an agent to receive its
share of a fund for reUgious purposes must be by vote and not by sig-
nature of the individual members. State v. Trustees, 11 Ohio 24,
28.

When the term of office of trustees of a church has not expired and

235

§ 58] NON-PROFIT ASSOCIATIONS ^ [Chap. V

tion has no rtiles, it may adopt rules at any meeting.^^
If it adopts by custom rules contrary to the usual par-

they have not resigned, a new election held on the announcement of the
chairman that their offices were vacant is void. Bristor v. Burr, 12
N. Y. St. Rep. 638 (Sup. Ct.).

Informal association to raise money to build a soldiers' monument.
A minorit}^, including president and treasurer, refused to abide by vote
of majority as to its appUcation and withdrew from the meeting. A suc-
cessor president was elected and the old one brings bill to enforce his
right to the office. Held : He had no vested right in the office. As there
were no rules of the association there was no definite tenure of the office
of president and a new one could be elected at the pleasure of the asso-
ciation. In order to pass upon its rights and powers, as well as those of
its members, "both the law of corporations and the law of co-partner-
ship are to be resorted to, in the absence of satisfactory regulations, the
choice being determined by the nature of the feature under considera-
tion." Ostrom V. Greene, 161 N. Y. 353, 360, 55 N. E. 919.

It was held that the constitution of an association of churches con-
templated that a majority of the members present at any regular meet-
ing should govern the association, even though they are a minority of
the whole body. Hence contrary action of a majority at an irregular
meeting did not prevail. "A voluntaiy association has no existence or
power except as contained in its fonnal articles of agreement or estab-
lished by custoiti acquiesced in by the parties to it. When the asso-
ciation consists, as here, of the annual meeting of delegates from its
constituent members — the churches — to further certain common inter-
ests, the organization is dissolved upon adjom-nment into its individual
elements until reassembled pursuant to the common agreement."
Kerr v. Hicks, 154 N. C. 267, 268, 70 S. E. 468.

In a church organized on the strictly Congregational principle the
wiU of a majority must govern and that must be expressed in the ordi-
nary mode at the meetings of the church, not by holding separate un-
authorized meetings and purportmg to depose existing officers. Long
V. Harvey, 177 Pa. 473, 480, 35 Atl. 869.

When a motion to adjourn is declared adopted by the moderator of
a Congregational church and some remain and reorganize the meeting
and thereafter two separate organizations are maintained, that which
in fact had a majority will be deemed the original church and entitled to
its property. The announcement of the result of the vote by the moder-
ator is not binding if clearly false and fraudulent. Gipson v. Morris, 31
Tex. Civ. App. 645, 647, 649, 73 S. W. 85.

They must act at a meeting and not by signed petition. Barton v.
Fitzpatrick, 65 So. 390 (Ala.).

'6 Farmers' telephone line. "But this association had no consti-
tution, rules or by-laws. At any meeting duly held it had a right to
adopt such rules as it saw fit, except that it coukl not do an illegal act
or adopt, any measure subversive to the object for which it was formed."
"It is not the i)rovince of the courts to pass upon the wisdom or fairness
of the policy indicated in tlu> resolution, so long as it attemi)t(Hl nothing
8ubvcrsivc to the puipose for which the association was organized."

236

Chap. V] INTERNAL AFFAIRS [§ 58

liamentary rules, they are equally binding. ^^ The State
will, of course, punish an illegal act even if done in ac-
cordance with the by-laws of a voluntary association
to which the victim has assented ^^ and the courts
will not enforce a penalty for refusal to do an illegal
act.^9

Branagan v. Buckman, 122 N. Y. S. 610, 67 Misc. 242, aff'd 130 N. Y.
S. 1106, 145 App. Div. 950.

" By the customs of the society of Friends decision is not made by a
majority vote or by any vote, but by the recording by the clerk of the
"sense of the meeting." The clerk has the right to open the meeting.
Hence when a majority of a meeting attempted by force to deprive him
of that right and he withdrew with others and organized the meeting
elsewhere, a treasurer appointed at the latter meeting and duly re-
corded by the clerk was legally entitled to the office and a payment
made by the defendant to him was good payment of the note in suit.
Field V. Field, 9 Wend. 394, 401. Ace. Earle v. Wood, 8 Cush. 430,
454.

In a controversy as to the marketabihty of a title which had passed
through the trustees of an unincorporated society of Shakers it was con-
tended that it did not appear that the trustees acted with the consent
of the ministry and elders evidenced by vote at a formal meeting. It
did appear that consent had been obtained informally. Held: Since
not organized under some act of legislature the society was unincor-
porated and could make its own rules of action. Title did not vest in all
the members because of a statute empowering its trustees to hold title.
Since it was never the custom of the society to act in formal meetings,
this must be accepted as their own intei-pretation of the "covenant"
which forms their constitution and so there was no need of a formal vote
to authorize the conveyance. Feiner v. Reiss, 90 N. Y. S. 568, 98 App.
Div. 568.

'^ State V. Williams, 75 N. C. 134 (initiation c,eremony).

1^ An employers' association cannot enforce a penalty on a member
for refusal to obey an order to employ only members of a particular labor
imion because such order is against pubhc policy and void, because it
operated generally through the community and might prevent craftsmen
from getting work at their trade. McCord v. Thompson-Starrett Co.,
113 N. Y. S. 385, 129 App. Div. 130.

Action on bond given by a member of an employers' association on
joining to obey orders of association as to relations with employees. In
a strike the association decided not to employ men unless they signed
an arbitration agreement and so notified defendant. He disobeyed and
was sued on bond. Held : Bond vahd, and so was association. Pm-pose
was stabihty in building trades. Defendant bound by rules of associa-
tion he joined. Trust, etc. Co. v. Waldhauer, 95 N. Y. S. 222, 226, 47
Misc. 7.

237

§ 59] NON-PROFIT ASSOCIATIONS [Chap. V

§59. "Ultra Vires"

There is a tendency to apply to non-profit associa-
tions the phrase ultra vires, borrowed from the law
of corporations. This gives much comfort to those who
contend that the common law recognizes the existence
of associations as something distinct from their mem-
bers. Thus a trade union was forbidden to apply its
funds to pay election expenses or to maintain labor
members of parliament because outside the objects
expressly or impliedly included in the act legalizing
their existence,^ and this conception was applied in the
Free Church case.^ The phrase has been used occa-
sionally in cases in this country,^ and the essence of the
doctrine has been applied in many cases. Most of them,
ho"vyever, were suits for control of property of the asso-
ciation, and as we shall see presently were explained by
an application, somewhat forced, of the doctrines of the
law of trusts.^ In a few cases the conception of the
court seems to have been that of ultra vires and it is
submitted that this is the correct principle.^

1 Amal. Soc. v. Osborne, (1910) A. C. 87.

Brett, L. J., used the term ultra vires with reference to expulsion
from a social club in Dawkins v. Antrobus, L. R. 17 Ch. D. 615, 630.

2 See § 61, note 32.

3 Everett v. First Presbyterian Church, 53 N. J. Eq. 500, 510, 32
Atl. 747.

The installation of an exchange was said to be not ultra vires for an
informal farmers' telephone association. Francis v. Perry, 144 N. Y. S.
167.

« See § 61.

' When no writing defines their powers, a majority of those who
attend any meeting have a right to decide, but they must keep within
the HCoj)(! of the ol)j(H;t of the a.ssociation. "As in partnerships and
corporations, the majority can only govern within tlie object for which
the jiartnrT.ship or coqKjrat ion was formed." Association to hire miU-
tary HubsMlut.es. Abels v. Mr.Kvvn, 18 N. .1. Eq. 462, 465.

"At common law every ])!irt icipant in a voluntary society has the
absolute right which the court will i)rotect of having its property con-

238

Chap. V] PROPERTY [§ 60

§ 60. Property

The problem of adapting our individualistic law of
real property to the needs of associations has seemed as
difficult of solution in the case of non-profit associa-
tions as in that of partnerships, — the States dividing
on the questions in about the same way. In most juris-
dictions the rule is that an unincorporated association
cannot in its aggregate capacity take title to lands in
grant. ''A valid grant to such a community can only
be made to the individuals composing it or to an indi-
vidual and his heirs in trust for its use." ^ ''A grant to
such association eo nomine would pass no title." - So
a reservation for the benefit of an association is void.^
The reason given for declaring invalid deeds to associa-
tions is that they are void for uncertainty.^

trolled and administered according to its organic plan and to partici-
pate in its affairs in harmony therewith." But under statute a re-
ligious society had right to incorporate against will of some. Temple
V. Vincent, 127 Wis. 93, 105 N. W. 1026, 1028.

1 Goesele v. Bimeler, 5 McLean 223, 10 Fed. Cas. No. 5503 (parti-
tion of property of sociahstic community) aff'd in 14 How. 589; Gewin
V. Mt. Pilgrim Church, 166 Ala. 345, 51 So. 947 (church) ; East Haddam
Church V. East Haddam Soc, 44 Conn. 259 (bill to set aside a con-
veyance. Plaintiff was unincoiporated association. "As such they
are not the legal owners of the property in question and by the law of
this State cannot own real estate"); Jackson v. Cory, 8 Johns. 385,
388 (ejectment of land conveyed to the "people of" a county, not
incorporated) ; Liggett v. Ladd, 17 Ore. 89, 95, 21 Pac. 133 (bill to en-
force a conditional Limitation).

Deacons of an unincorporated church cannot as such claim title by
prescription to a spring used for baptismal purposes. They hold no
office recognized by secular com-ts. "The church society collectively,
being unincoi-porated, was without capacity to acquire or hold title."
Stewart v. White, 128 Ala. 202, 208, 30 So. 526.

2 Attorney General v. Federal St., 3 Gray 1, 44; German Land
Ass'n V. SchoUer, 10 Minn. 331, 338 (bill in equity to enforce trust
inter vivos). See also Reding v. Anderson, 72 la. 498, 34 N. W. 300.

^ Hornbeck v. Westbrook, 9 Johns. 73, 74 (land conveyed subject
to a proviso for the benefit of the inhabitants of a town, not incor-
porated).

* Hornbeck v. Westbrook, 9 Johns. 73, 74.

239

§ 60] NON-PROFIT ASSOCL\TIONS [Chap. V

Property may, however, be acquired by trustees for
the benefit of an unincorporated association,^ if this is
not obnoxious to the rule against perpetuities.^ A
conveyance in trust for an unincorporated association
is not a pubUc charity. Those who take the equitable
interest are capable of ascertainment." "^Tiere a fund
is raised by contributions of members for a specific
purpose, a subsequent decision of a majorit}^ of the
members to apply it for a different purpose can be
enjoined by minority contributors and equity will
enforce the original trust. ^ \Mien a fund is raised by
contributions of members not for the benefit of some
specific beneficiary", but to acquire certain property,
title to which is taken in the name of some individual

5 :\IendeiihaU v. First Church, 177 Ind. 336, 98 N. E. 57; Earle v.
Wood, S Cush. 430, 445; Attorney General v. Federal St., 3 Gray 1,
44; Martin v. Board. 149 Wis. IS, 134 N. W. 1125.

An unincorporated church is without capacity to hold legal title.
An agreement to conyey to trustees for it did not create a charitable
use. Yet chancery- has jurisdiction over such associations and their
property because of the trust nature of their property and will compel
conveyance under the contract to a church corporation formed by the
majorit}'. Gewin v. Mt. Pilgrim Church, 166 Ala. 345. 51 So. 947.

A treasurer of an unincoiporated chiu-ch holds as trustee for the
church its funds raised for the support of the poor and for other church
purposes. Weld v. May, 9 Cush. 181, 189.

* Thus a gift in trust for an unincorporated reUgious society is not
obnoxious to the rule against perpetuities which prevent ahenation
because-the entire interest at am- time is represented by known liv-
ing persons; that is, the legal estate bj' the trustees and the equitable
interest by those persons who then constitute the association, who
may be ascertained according to its rules governing membership. Old
South Society v. Crocker, 119 Mass. 1, 23.

^ The custom of permitting the pubUc to attend worship in a church
does not divest the association of its private character or its right to
exclude the public. Attorney General v. Federal St., 3 Gray 1, 49, 50;
Old South Society v. Crocker, 119 Mass. 1, 23.

The several associations are so far entities that thej* are represented
in court by members who an.swer for themselves and all other members.
Mannix v. Purcell, 40 Ohio St. 102, 141, 19 N. E. 72.

» Lcathomian v. Wolf, 240 Pa. St. 557, 566, 88 Atl. 17 (money raised
by an a.ssociation for a national orphan home of a fraternal order.
Majority voted it for a local home).

240

Chap. V] PROPERTY [§ 60

without any trust expressed, ne will hold it as trustee
for the association. If by the rules of the association,
however, it is to be held free from trust, there is no
reason why those rules should not be accepted by the
courts. The usual presumption of intent of the donors
is obviously not applicable. Thus if the property of a
Cathohc congregation bought by its contributions, the
legal title to which is vested in its Bishop under the
rules of the church, is free from the control of the con-
gregation, it is not properly described as a trust fund
held for the benefit of the congregation.^ So where
the fund is raised to build a church for a particular so-
ciety, the fact that some of the contributors are not
members of the association does not in the absence of
agreement deprive the association of its control of the
property.^" Any beneficiary, however, may proceed
in equity to compel the trustee to execute the trust,
and so a member of an association as an individual if
he can establish the existence of a trust impressed upon
its property of which he is a beneficiary, may sue to
enforce it,^^ but not for partition of the property pur-

9 Hennessey v. Walsh, 55 N. H. 515.

Contra. Fink v. Umshied, 40 Kan. 271, 19 Pac. 623; Mannix v.
PurceU, 46 Ohio St., 102, 136, 19 N. E. 72. See Heiss v. Vosbui-g, 59
Wis. 532, 18 N. W. 463.

A fund raised by a CathoUc congregation for a specific object and
entrusted to the priest is impressed with a trust that the congregation
can enforce. Amish v. Gelhaus, 71 la. 170, 174, 32 N. W. 318.

10 Busby V. MitcheU, 23 S. C. 472, 476.

Contra. Aveiy v. Baker, 27 Neb. 388, 397, 43 S. W. 174.

An unincoi-porated guild formed to promote the interests of an in-
corporated church obtained permission from the latter to build an ad-
dition to the church and raised money for it. The fund was contributed
to by members of the church and by other church organizations. Held:
The guild acquu-ed no title in the addition which was on property of
the coiporation and could not control the disposition of it. Reed v.
St. Ambrose Church, 137 Pa. St. 320, 20 Atl. 1002.

11 Nash V. Sutton, 117 N. C. 231, 233, 23 S. E. 198 (religious so-
ciety).

At a pubHc meeting subscriptions were taken for a church to be

241

§ 60] NON-PROFIT ASSOCIATIONS [Chap. V

chased.^- If there is more than one trustee, they take
as joint tenants, and there is survivorship on the death

used by all visitors and others at a summer resort. Held: A bill to
enforce the trust may be brought by one within the designation of
beneficiaries alleging that the trustees had allowed it to be used ex-
clusively for one denomination. It could not be brought merely by a
contributor to the charitable trust. Ludlam v. Higbee, 11 N. J. Eq.
342, 3-47.

The session of a Presbyterian church brought a bill for an account-
ing against the trustees of the property who had placed in the parson-
age a pastor not approved by the presbji:ery to which the church be-
longed. Held: Though the trustees were by statute a corporation
holding the legal title, the beneficiaries were the members of the con-
gregation, an unincorporated association, and the plaintiffs as members
of the congregation are beneficiaries and entitled to bring this bill
(p. 506). The session as such is merely a committee of the congregation
to deal with spiritual affairs and has no title in the property in its official
capacity (p. 507). But it has the right to determine what use of the
church edifice is contrary to the creed, and a member in minority has
the right to come into court and prevent a use thus determined to be
improper (p. 510). But here there was no breach of trust, because all
members of the congregation acquiesced in the action of the trustees
tiow complained of and so are estopped (p. 519). Everett v. First Pres-
byterian Church, 53 N. J. Eq. 500, 32 Atl. 747.

Where several rehgious denominations contributed to the expense
of building a church and keeping it in repair on the agreement that it
was to be used by aU without interfering with each other, but that the
Wesleyans were to have the preference as to the time of use, the other
denominations can enforce their right to use it against the Wesleyans.
Wilhams v. Church, 193 Pa. St. 120, 44 Atl. 272.

A loosely formed committee to raise money to erect a statue, of
which defendant was a member, practical!}' abandoned its purpose.
The defendant went ahead on his own responsibihty and had the
statue erected, using for it some money he had raised for the former
project. Fourteen years after abandoning the work two survivors of
the old committee met and i^urported to assign to plaintiff the money
the defendant originally collected. Held: Neither the committee nor
the plaintiff could call defendant to account. Only the original sub-
scribers could do that. Doyle v. Reid, 53 N. Y. S. 365, 33 App. Div.
631.

Members of a club may sue in equity to compel a retiring treasurer
to turn over to his successor a silver tobacco box belonging to the
society which had a sentimental value. Fells v. Read, 3 Ves. Jr.
70.

'^ An unincorjxjrated church organized an unincorporated asso-
ciation which raised money for a school which was incoqiorated. The
:i.s.s()ciation retained only the right to elect trustees. Held: Individual
churches have no title in the jjropcrty of the corporation which enables
them lo petition for its partition. Spring Green Church v. Thornton,
158 N. C. 119, 122, 73 S. E. 810.

242

Chap. V] PROPERTY [§ 60

of one, but inter vivos all must join in a conveyance.^'
The trustees are the proper ones to bring suit to protect
the trust estate. ^^ When trustees are appointed by the
court they and their successors, duly appointed, are
the proper ones to carry out the trust. ^^ A surviving
trustee having legal title may maintain ejectment
against the agents of the church. ^^ Because only a legal
title is subject to a mechanic's lien, such a lien could not
be established on a church, title to which was vested in
trustees when the contract out of which the claim arose
was with the church society.^^ The trustee in the first
instance may determine the use of the property held
in trust. ^^ Whether he can convert real estate into
personalty depends on the terms of the trust.^^ A rep-

" Hence all must join as plaintiffs on a writ of entry to foreclose a
mortgage, Webster v. Vandeventer, 6 Gray 428, 429, or to assign a
mortgage, Austin v. Shaw, 10 Allen 552.

When members of an unincorporated club within a church raise
money to buy property for the church, title to which is taken by a
trustee, but the church later declines to accept it, the bishop has no
right to interfere with a sale of the property by the trustees for the
club. Eis V. Croze, 149 Mich. 62, 73, 112 N. W. 943.

A church cannot claim title to land conveyed to its trustees in con-
sideration of an agreement by its stewards that it always be kept open
without ratifying the agreement. French v. Barre, 58 Vt. 567, 5 Atl.
568.

^* Unangst v. Shortz, 5 Whart. 506, 523 (church); Wolfe v. Linestone
Council, 233 Pa. 357, 82 Atl. 499 (lodge).

A bond and mortgage made payable to "S, Secretary of Baltimore
Agricultural Aid Society," may be enforced by him personally, reject-
ing the descriptive words. The legal interest had vested in him. Sang-
ston V. Gordon, 22 Graft (Va.) 755, 763.

15 Crawford v. Nies, 220 Mass. 61.

" Though they had managed the property for the church for years,
their control had not been inconsistent with the trust and therefore
not adverse to the plaintiff. Burrows v. Holt, 20 Coim. 459, 465.

" Peabody v. Eastern Methodist Soc, 5 Allen 540.

18 Prickett v. W^ells, 117 Mo. 502, 504, 24 S. W. 52 (choice of pastor).

1^ A devise to a rehgious society to build a meeting house thereon
gives a fee and the trustees may sell and apply the proceeds to that
purpose. Griffitts v. Cope, 17 Pa. St. 96, 100.

The legislature has power to authorize trustees of a rehgious society
to convert into personalty, real estate held in trust for the society which

243

§ 60] NON-PROFIT ASSOCIATIONS - [Chap. V

resentation by a trustee that the trust estate was Uable
for his debts will not bind the beneficiaries.^^ The asso-
ciation as such cannot pass title to property held in
trust for it.-^

Election of new trustees by the association does not
of itself divest the title of the old trustees. -^ Transfer
of the equitable interests of beneficiaries will be an
equitable defense to ejectment by the successor in title
of the trustee. ^^ A lease to an association has been held
binding on the lessor because the lessee's officers who
signed in its name were personally bound. ^^ There are
numerous decisions that incorporation of an unincorpo-
rated association ipso facto transfers to the corporation
title to the property of the association.^^ The explana-

cannot othem-ise be conveyed. Re Van Home, 18 R. I. 389, 394, 28
Atl. 341.

2» Mannix v. PurceU, 46 Ohio St. 102, 138, 19 N. E. 72 (church).

21 Austin V. Shaw, 10 Allen 552 (assignment of mortgage); East
Haddam Church v. East Haddam Soc, 44 Conn. 259 (deed).

Land was conveyed to an EpiscopaUan bishop in trust for the
wardens, vestry and congregation of a certain church which was not
incorporated. Later the vestrymen of the church executed a mort-
gage on it. Held: Since the church was unincorporated the trustee
was more than a passive trustee and was the only person authorized
to execute it. Since the mortgage was without his consent, it was void.
HiU Estate Co. v. Whittlesey, 21 Wash. 142, 145, 57 Pac. 345.

22 Mechanic's hen for repairs cannot be enforced unless the contract
is enforceable against the surviving trustee. Peabody v. Eastern Metho-
dist Soc, 5 Allen 540.

23 Equitable defense pro rata where only part of the equitable in-
terest was acquii'cd. Douchitt v. Stinson, 73 Mo. 199, 201.

Under a Pennsylvania statute aU property held in trust for a church
shall be subject to the control of the congregation. Held: A vote of a
congregation placing title in the bishop free from such control will
not be enforced. Mazaika v. Krauczimas, 233 Pa. St. 138, 153, 81 Atl.
938; Novicis v. Krauczunas, 240 Pa. St. 248, 87 Atl. 646.

^ Hence there was consideration for lessor's covenant of quiet en-
joyment. Reding v. Anderson, 72 la. 498, 34 N. W. 300.

26 Reorganized Church v. Cimrch of Christ, 60 Fed. 937, 941 (C. C.
— Mo.) (I)('n(!ficial interest in property h(^ld in trust).

Legal title of trustcM-s. Sanchez v. Grace M. E. Church, 114 Cal.
295, 4f) Pac. 2; Hapi)y v. Morion, 33 111. 398, 413; Dubs v. Egli, 167 111.
514, 47 N. E. 760; Christian Chun;!) v. Church of Christ, 219 111. 503,

244

Chap. V] ' PROPERTY [§ 60

tion has been made that this is the result of an act of
legislature and that the legislature has power to do it,^®
but it would seem rather that it is the result of the vol-
untary act of the association accepting the act of incor-
poration.^^ It seems clear that incorporation by a
minority is insufficient to pass the title.^^ An associa-
tion already in existence cannot be prevented from
using its name by a corporation later organized with a
similar name.^^

76 N. E. 703; Baptist Church v. Witherell, 3 Paige 296, 299; Attorney
General v. Dubhn, 38 N. H. 459, 575. Hence the corporation can re-
cover the funds on deposit in a bank. North Church v. McGowan, 62
Mo. 279, 288.

Where the majority faction of a church incorporated, it incorporated
both factions or the whole church, and transferred the church prop-
erty to it. Hohn v. Hohn, 81 Wis. 374, 384, 51 N. W. 579.

26 Reformed, etc. Church v. Mott, 7 Paige 77, 82.

2^ Grand Lodge of Illinois sought to incoi-porate and consoKdate
with another similar one by special act of legislature. Held: "The rights
of the parties to this controversy to the funds and property in question
depend upon the law of the Order D. O. H. and not upon any act of the
legislature of lUinois." Alchenburger v. Lodge, 138 111. App. 204, 207.
See query in Craig v. Inhabitants of Franlclin County, 58 Me. 479, 492.

28 Happy V. Morton, 33 111. 398, 413; Hemy v. Deitrick, 84 Pa. St.
286, 294.

23 A lodge of K. of P. seceded because it was forbidden to print
ritual in German as before and formed Improved K. of P., incorporated.
Plaintiff is Supreme Lodge K. of P. and is a corporation. It seeks to
enjoin defendant from using that name. Held: Incorporation does
not give exclusive right to name already in use by an existing volun-
tary society. Rights of the order not violated because no evidence of
intent to deceive by use of similar name or that it does in fact deceive.
K. P. V. I. K. P., 113 Mich. 133, 135, 71 N. W. 470, 38 L. R. A. 658.

Dissatisfied members of an unincorporated society cannot by incor-
porating under the same name bring bill to enjoin original society from
using that name on ground that it deceives the pubhc. Black Rabbit
Ass'n V. Munday, 21 Abb. N. Cas. (N. Y.) 99, 103.

Injunction allowed in suit by member of an unincorporated associa-
tion against a corporation of same name to prevent it from using that
name. One of purjjoses of the association was to give dramatic enter-
tainments and it was well known in that capacity, and defendant in
appropriating the name caused damage. This does not affect charter
powers. Defendant may go on under another name. Fact that statute
says corporation shall not take name of existing corporation does not
imply that plaintiff cannot maintain this suit. Aiello v. MontecaKo, 21
R. I. 496, 44 Atl. 931.

245

§ 60] NON-PROFIT ASSOCIATIONS [Chap. V

A peculiar form of title is that of pew owners in
churches in many of the States. They are seldom iden-
tical with the membership in the association and seldom
form a separate association. Their relations to the
church are usually several. They are not tenants in
common of the building, but have a usufructuary in-
terest in it which is ended only by a destruction of the
church which is inevitable or reasonably necessary.^"
Burial rights are sometimes similar.^^

As a logical consequence of the rule regarding title
to real estate it is held that a devise to an unincorpo-
rated association is void.^^ It is said that the associa-

30 Jones V. Towne, 58 N. H. 462; Church v. Wells, 24 Pa. St. 249,
251; Barnard v. Whipple, 29 Vt. 401; O'Hear v. De Goesbriand, 33
Vt. 593, 606. See Attorney General v. Federal St., 3 Gray 1, 45.

A religious society that has had undisputed possession of property
for forty years may pass title to it in accordance with its vote. Pew
owners have only a right of occupancy subject to the superior right of
the society owning the pews. It is a qualified ownership subject to
superior title. First Presbyterian Soc. v. Bass, 68 N. H. 333, 337, 44
Atl. 485.

A pewholder's right is usufructuary only and is ended when the
church is destroyed by fire. Witthaus v. St. Thomas Church, 146
N. Y. S. 279, 161 App. Div. 208.

A pew owner holds subject to the estabUshed usages of the denomina-
tion and a usage that deprives him of all right in the proceeds of sale of
the church when it becomes too poor to further maintain worship is
binding. It was assumed that he knew of the usage. Huntington v.
Ramsden, 92 Atl. 336 (N. H.).

3' Dwenger v. Geary, 113 Ind. 106, 121, 45 N. E. 183; St. John's
Church V. Hanns, 31 Pa. St. 9.

•^- Greene v. Dennis, 6 Conn. 293, 16 Am. Dec. 58 (yearly meeting of
Quakers); Brewster v. McCall, 15 Conn. 274, 294 (missionary society);
Marx V. McGlynn, 88 N. Y. 357, 376 (Catholic society) ; Barker v. Wood,
9 Mass. 419 (devise to part of the members of a parish).

By statute a church society was made a cori)()rat ion to the extent and
for the j)urpose of taking a devise, otherwise "incapable in its collective
capacity of taking any estate in land." Hamblet v. Bennett, 6 Allen
140, 145.

See Byam v. Bickford, 140 Mass. 31, 32, 2 N. E. 687, where a deed
inter vivos to an association was held to vest title to the land in its mem-
})ers an t(!nant3 in common.

A devise to an unincorporated church is void and a provision for sus-
jjcnsion of the gift until it incorporates does not help it. Washburn v.

246

Chap. V] PROPERTY [§ 60

tion as a body is incapable of taking and that it was
not intended that the members should take as individ-
uals.^'^ The next step was to hold that bequests of per-
sonal property to an association are void.^* Even where
the devise or bequest is to the association in trust for
charity it has been held void.^^ It has even been held
that a trust for the benefit of an unincorporated asso-

Acome, 131 N. Y. S. 963, 967, afE'd 136 N. Y. S. 1150, 151 App.
Div. 948.

33 Greene v. Dennis, 6 Conn. 293, 299 (devise to the "Yearly Meet-
ing of the People called Quakers").

34 State V. Warren, 28 Md. 338, 352; Owens v. Methodist Soc, 14
N. Y. 380, 385; Re Compton's WiU, 131 N. Y. S. 183; Riley v. Diggs,
2 Dem. Surr. 184, 189 (N. Y.); Ely v. Ely, 148 N. Y. S. 691, 707 (App.
Div.); McKeon v. Kearney, 57 How. Pr. 349, 353; Leonard v. Daven-
port, 58 How. Pr. 384, 386; Reeves v. Reeves, 73 Tenn. 644, 647; Bible
Soc. V. Pendleton, 7 W. Va. 79, 86.

A decision of the question was avoided in Tucker v. Seamen's Aid
Soc, 7 Met. 188, 200, because that will] contained this clause: "My
wish is, in all cases in this will, where any sum is given to any society or
voluntary association not incorporated, that the same shall go to the
treasurer, for the time being, of such society or voluntary association,
for the purposes of such society respectively, and that the receipt of such
treasurer for the same shall be a sufficient discharge." Shaw, C. J.,
said that the treasurer of a voluntary society was as capable of being
identified as any other individual and the trust upon which he was to
take was indicated with equal certainty.

See an early case which held a bequest in trust for charity a vaUd
trust in the then members. Bartlett v. King, 12 Mass. 537, 540.

While it seems probable in Massachusetts that a bequest as well as a
devise to an association wiU be upheld as vesting in the members as in-
dividuals, it will be wise to follow the form considered in Tucker v. Sea-
men's Aid Soc, if only to spare the executor the problem of securing
receipts from all the members.

35 Philadelphia Baptist Ass'n v. Hart, 4 Wheat. 1, 28 (devise to
society in trust for persons to be selected by the society) (statute of
EUzabeth respecting charities was not in force in Virginia); Owens v.
Methodist Soc, 14 N. Y. 380, 385; White v. Howard, 46 N. Y. 144 (de-
vise to charitable society to aid indigent Southern churches) ; Pratt v.
Roman CathoMc Orphan Asylum, 46 N. Y. S. 1035, 1036, 20 App. Div.
352; In re Waterford Y. M. C. A., 47 N. Y. S. 854, 22 App. Div. 325;
Chih Soc. V. Bowen, 21 Hun 389; Carpenter v. Westchester County His-
torical Soc, 2 Dem. Surr. 574, 575 (N. Y.); Sherwood v. Am. Bible Soc,
1 Keyes 561, 567 (N. Y.) 4 App. Div. 227, 234; Betts v. Betts, 4 Abb.
N. C. 317, 403 (N. Y.).

But see contra, Bartlett v. King, 12 Mass. 537, 540 (vesting title in
members as individuals).

247

§ 60] NON-PROFIT ASSOCIATIONS [Chap. V

elation is unenforceable because the beneficiaries can-
not be ascertained.^^

Some States have been more hberal." It has been
held that a bequest to an association vests in its mem-
bers as individuals,^^ and that since the association can-
not act as trustee the trust will be enforced by appoint-
ment of another trustee.^^ In Vermont an association,
though unincorporated, may take a trust for charity.'*"
In Maryland, where the statute of Elizabeth is not in
force, an ingenious way was invented to get along
without it.'*^ It has been held that an unincorporated

3® Downing v. Marshall, 23 N. Y. 366, 382 (devise in trust for a mis-
sionary^ society).

A trust for the Methodist Episcopal Church of the United States
(which is not incorporated) is too indefinite to be enforced and is void,
though a local society of the church had used the property for years.
Little V. Willford, 31 Minn. 173, 17 N. W. 282. Ace. Trustees v. Trus-
tees, 84 Md. 173, 35 Atl. 8; Carskadon v. Torreyson, 17 W. Va. 43, 107
(in these cases the form of deed was that recommended by the chm-ch
discipUne) .

^^ Held: Property devised to an unincorporated church as a per-
petual fund, the income to be paid in a specified manner, is a trust which
the church because unincorporated cannot administer, but property
given for immediate expenditure — as in completing a church build-
ing — can be taken by the church in its own name. There is no objec-
tion to paying it to the person who ordinarily receives and keeps the
funds of the church (p. 192). The other devise is not void, but the heirs
take the property suljject to the trust and it will be enforced by a court
of equity (p. 197). When given to trustees named in the will they take
title. Johnson v. Mayne, 4 la. 180.

A New York bequest to an unincorporated church in Massachusetts
is valid because by statute in Massachusetts such church associations
are empowered to take such bequests. Congregational Unitarian Soc.
V. Hale, 51 N. Y. S. 704, 707.

A devise to an unincorporated religious society in trust for the repair
of church buildings and for the extension and promotion of a certain
faith, is a donation for religious purposes and not a gift to or for the use
of tlic particular church designated as trustee. Glover v. Baker, 76 N. H.
393, 402, S3 Atl. 910.

'« (Juild V. Allen, 28 R. I. 4.30, 434, 67 Atl. 855.

•■•» (luild V. Alien, 28 R. I. 430, 434, 67 Atl. 855; HeiskeU y. Lodge,
87 Tenn. 60S, 673, 11 S. W. 825.

" Burr V. Smith, 7 Vt. 241. At least, if it is a religious society by
virtue of the State constitution. Smith v. Nelson, IS Vt. 511.

*• A bequest to a corjioration for any of its authorized agencies is

248

Chap. VJ PROPERTY [§60

lodge issuing a benefit certificate may be designated as
the beneficiary.^

As to the title to personal property of an association,
it has been said that it is vested in the individual mem-
bers,'*^ but that one who leaves the association abandons
his interest in the property and those who remain suc-
ceed to it.^^ How this differs from title in the associa-

valid though the beneficiary be an unincorporated association. The
donation is regarded in such case as made to the corporation, not in
trust, but upon condition that it be apphed to the particular corporate
use, unless the purpose to create a trust be clear. Thus it avoids objec-
tion of perpetuity and uncertainty.

Though a gift by will to an unincorporated association is void be-
cause it can become effective only by the aid of the law, a gift inter vivos
is different because it is an act in pais. As far as the donor is concerned
it is complete. Snowden v. Crown Cork & Seal Co., 114 Md. 650, 80
Atl. 510, 512.

^ The assured and those claiming under him are estopped to ques-
tion its capacity to take. Bacon v. Brotherhood, 46 Minn. 303, 48 N. W.
1127.

^ Trespass for removal of a building transferred to plaintiff by deeti
of a committee authorized by vote signed by all members of a fire com-
pany. Cm-tiss V. Hoyt, 19 Conn. 154, 167.

A conveyance of land to a rehgious society before incorporation vested
title in the members of the society in trust for the church and for the
religious purposes it represented. Apostolic Union v. Kundson, 21 Idaho
589, 594, 123 Pac. 473.

An indictment for larceny from a body of persons not incorporated
should be laid as the property of the individuals comprising the body
and not of the company. Wallace v. People, 63 111. 45i.

Unincorporated labor union. One who gets assignment pursuant to
vote of rights from all members in good standing of claims for misap-
propriation of funds may sue even if he has not assignment from memr
bers suspended who have a conditional right of reinstatement. Brown
V. Stoerkel, 74 Mich. 269, 276, 41 N. W. 921, 3 L. R. A. 430.

" Then- ownei'ship of property is of the same intermediate character.
It partakes of the quaUties of both the others, the title being for many
purposes joint and several like that of partners or joint tenants, while
the right of possession is joint only as in corporations. Where the
question of the right of present possession arises, it must be decided
by the constitution and by-laws of the association or in the absence of
any sufficient provision therein for such a case, by the majority."
Liederkranz Singing Soc. v. Germania Turn-Verein, 163 Pa. St. 265,
268, 29 Atl. 918.

« Curtiss V. Hoyt, 19 Conn. 154, 167.

A society on tontine principle issued bonds of several classes with
provision for redemption out of seventy per cent, of payments for later

249

§ 60] NON-PROFIT ASSOCIATIONS [Chap. V

tion is hard to understand. The more satisfactory rule
would seem to be that title is in the association. That
is the law of associations for profit. In accordance with
this view it has been held that title is in the associa-
tion/^ that when a group of members secede from the
association, even though they are a majority, they lose
all interest in its property,^^ that members had no right

bonds. Theory of redemption was that some would default on pay-
ments and rest win thereby. Held: Such contracts not illegal, but
plaintiffs cannot bring creditors' bill for receiver merely alleging they
are bondholders. Does not appear that they are all of one class. Can-
not be said from the bill that any of complainants are entitled to any-
thing. "It apphes the principle of joint tenancy to the investments
of the subscribers, the sur\'ivorship depending upon default instead of
death." Union Invest. Ass'n v. Lutz, 50 111. App. 176.

The fact that a local union withdrew from a national union and
affihated with another was said to have no effect on its identity aa
affecting property rights. Shipwright's Ass'n v. MitcheU, 60 Wash.
529, 111 Pac. 780.

^ An unincorijorated association can claim property being sold on
execution bv a sheriff as well as if it were incorporated. Lavretta v.
Holcombe, 98 Ala. 503, 12 So. 789.

Indiv-idual members of a church cannot convey a right of way over
its land. Individual members of a church representing it may enjoin
a trespass on its property. jMacon Co. v. Riggs, 87 Ga. 158, 13 S. E.
312.

A minority of members of a church who dishked the pastor installed
by the majority sought partition of the property of the church as tenants
in common. Held: The land was bought for the chm-ch and title taken
in the name of the unincoiporated association. A statute saj^s that
"private societies" are capable of acquiring estates. The rule of the
majority prevails on questions of church government that are not
doctrinal and the minority have no property right that entitles them
to partition. Le Blanc v. Lemaire, 105 La. 539, 5-42, 30 So. 135.

"A member of a stock exchange has merely the enjojTiient and use
of it while he is a member and the property remains with and belongs
to the body while it continues to exist, hke a pew, the ultimate and
dominant property in which is in the congregation and not in the pew-
holdor; and when the body ceases to exist those who may then be mem-
bers become entitled to their projiortionate share of its assets." White
V. Brownell, 2 Daly 329, 356 (N. Y.).

« McLauglilin v. Wall, SI Kan. 206, 105 Pac. 33; Alchenburgs v.
L<j(lg(', 13S 111. App. 204, 209; Ahlendorf v. Barkons, 20 Ind. App. 657,
6.59, 50 N. E. 887 (lodge); McFadden v. Murjihy, 149 Mass. 341, 344,
21 N. K. 868 (lodge); Hill v. Rauhan Aarre, 200 Mass. 438, 86 N. E.
924 (lodge); Schiller Conunandery No. 1, U. F. M. v. Jaenniohcn, 116
Mich. 129, 130, 74 N. W. 458; Moore v. Telephone Co., 171 Mich. 388,

250

Chap. V] PROPERTY [§ 60

to sue for a dissolution and a distribution of its assets/''
that members of an unincorporated church entering the
church building for other than religious purposes are
trespassers,"*^ that a suit for restoration of rights in an
association cannot be brought on the theory that they
are tenants in common ^^ and that no excise was due on
a sale of whiskey by a club to its members because there
was no transfer of title.^° In another case it was said

399, 137 N. W. 241 (farmers' telephone line) (see § 54, note 11); Man-
ning V. Shoemaker, 7 Pa. Super. Ct. 375, 382 (reUgious society).

Property held in trust for a Masonic lodge is not held for individual
members belonging at time of deed but for lodge as an entity. Differs
from business association. Members who leave forfeit right to benefit
of trust. Those who remain if the lodge does not cease to exist are en-
titled to the benefit of the trust. Minor v. Lodge, 130 S. W. 893, 897
(Tex. Civ. App.).

Coimecticut lodges which were set off from the jurisdiction of the
Massachusetts Grand Lodge under a Connecticut Grand Lodge were
not seceders because they took no voluntary action, so they did not
lose their interest in the funds of the Massachusetts Grand Lodge.
A. O. U. W. V. A. O. U. W., 81 Conn. 189, 208, 70 Atl. 617.

*7 Robertson v. Walker, 3 Baxt. (Tenn.) 316, 318; Thomas v. EU-
maker, 1 Pars. Eq. Cas. 98, 111 (Pa.).

48 Unangst v. Shortz, 5 Wliart. 506, 520.

In a church controversy, injunction is a proper remedy to prevent
unlawful use of the church property by a faction of the congregation.
Richter v. Rabat, 114 Mich. 575, 579, 72 N. W. 600.

A bill in equity by one faction of a church to enjoin another from
using the church because the minister who preached to them was not
duly elected was dismissed for want of jmusdiction. Smith v. Charles,
24 So. 968 (Miss.).

The losing party in a controversy over possession of church prop-
erty was held not in equity chargeable personally for the value of the
use and occupation of the chiu-ch property during the time they were
litigating to keep control of the society and its affairs. Bouldin v.
Alexander, 103 U. S. 330, 335, 26 L. ed. 308.

*3 Property was given in trust for two congregations. The two
united and used it as one. Later one of the original societies took pos-
session of the church and excluded the other. A bill in equity for
restoration to rights was brought on the theory that the plaintiffs were
tenants in common. Held: The bill discloses that they are members
of an association and not tenants in common. Hence their rights can
be adjusted only in equity. "By reason of numbers and the character
of the rights of the parties damages are unsuitable as a means of re-
dress." Kisor's Appeal, 62 Pa. St. 428, 434.

50 Graff V. Evans, 8 Q. B. D. 373.

251

§ 60] NON-PROFIT ASSOCIATIONS [Chap. V

that a fund raised by a fair and by contribution of mem-
bers for a public purpose belonged to the association
and was not impressed with a trust which the contribu-
tors could enforce. ^^ The funds in the treasury cannot
be distributed among the members without unanimous
consent.^^ The issue has been raised in cases relating to
the sale of liquor by clubs to members and the decisions
-are conflicting.^^

Though in most associations not organized for profit
the property rights are unimportant, in cases arising
out of the failure of the communistic experiments that
have been tried in various places, the issues have in-
volved substantial amounts. The cardinal feature of
these societies is that the members contribute their
labor and its products to the common fund in return
for the obligation of support, but have no individual
right in the fund. These agreements are legal and it
follows that when a member voluntarily withdraws he
forfeits all claim on the property of the association.^*

" Parker v. OUver, 198 Mass. 488, 84 N. E. 860.

"There is no law in Louisiana wliich prevents an association of in-
dividuals from acquiring property and holding it in common for their
mutual benefit. And there is no law which prevents them from sell-
ing the same." Michenor v. Reinach, 49 La. Ann. 360, 362, 21 So.
552.

52 Kalbitzer v. Goodhue, 52 W. Va. 435, 440, 44 S. E. 264 (butcher's
protective association) .

" A sale of Uquor in a club was not meant to come within the scope
of the Licensing Acts. It was not a sale "at retail." The members
who bought were also vendors as to their own shares. They could not
have been sued for goods sold and delivered for the price. The general
property in the goods was in tlu^ club. A "special" property was in
trustees under certain rules. Other officers of the club had other
"special" proptTties. Graff v. Evans, 8 Q. B. D. 373.

Delivery by a club through its agents of beer which was its common
property to a member on credit or for cash which thereby became his
separate property is a sale. Marmont v. State, 48 Ind. 21.

" A m(!rnber of a communistic religious society who had withdrawn
brought imkbUalus aanuinpail. lie had contributed his jiroperty to
the society and was to b(! supported by it. \\v did not get all the sup-
])u\-\ he cxjM'ctcd and the funds were used to feed strangers and new

Chap. V] PROPERTY [§ 60

The most recent case recognizes expressly that title to
the common property is in the association,^^ but the

converts and all did not work equally hard to replenish the common
stock. Held: No right of action. The society was not illegal. Ruse
V. Williams, 14 Ariz. 445, 130 Pac. 887.

Bill by seceding Shakers for partition of property. Held: Bound
by their covenants. The trust was vaUd since for a charity and not a
perpetuity under the statute of EMzabeth. Gass v. Wilhite, 2 Dana
(Ky.) 170, 172, 178.

A Shaker who subscribed to their agreement for community prop-
erty and that no one withdrawing should have any claim against the
society, withdrew and sued for fair value of his twelve years' services.
Held: The agreement is vaUd and was knowingly signed by the plain-
tiff and he cannot recover. If it were invaUd, he was party to illegal-
ity and so cannot recover. Waite v. Merrill, 4 Greenleaf 102, 117
(Me.).

A member who sought to recover for the value of his labor was held
bound by laches, where he had waited fifty years after retiring from the
society before suing. Speidell v. Henrici, 15 Fed. 753, 120 U. S. 377,
30 L. ed. 718, 7 S. Ct. 610.

A child who gi'ew up in a communistic society at Zion on becoming
of age signed articles which provided for community ownership and only
right to support by members while Uving with the society. Also pro-
vided power of expulsion on certain terms. Plaintiff's husband was
expelled and she followed him. She now prays for partition of her share
in the common property. Held: The agi'eement was valid and bound
her. She has received the consideration for her labor and if it were in-
valid, she as a newcomer could not claim title to the original fund which
must revert to donors. Did not pass on question of forfeiture, etc.
Gaselys v. Separatist Soc, 13 Ohio St. 144, 154.

For a case relating to the right to exclude a member from the society,
see Nachtrieb v. Harmony Settlement, Fed. Cas. No. 10003; Baker v.
Nachtrieb, 19 Howard 126.

*^ A sociaUstic community with valuable land had been reduced to a
few members by withdrawals. The eight remaining were about to con-
vey the property to a corporation. Descendants of original contribu-
tors brought a bill claiming right in it by resulting trust. Held
(majority of court) : The agi'eements show a contribution of the prop-
erty to the society as a society which has not yet been divided by
common consent of members or by abandonment of purpose for which
formed. Those who withdraw from the society have no rights which
are transmissible or enforceable on dissolution of the society. Schwartz
V. Duss, 187 U. S. 8, 24, 47 L. ed. 53, 23 S. Ct. 4, 103 F. 561, 43 C. C. A.
323.

Descendants of the original founder of the society claimed title to
the property because the purposes of the society were impossible. The
court affirmed the title by survivorship in the remaining members.
Everett v. Duss, 206 Fed. 590, 608 (C. C. A. — Pa.).

Bill in equity for an account and partition of real and personal estate
of a religious and sociahstic community by an heir of a member who

253

§ 61] NON-PROFIT ASSOCIATIONS [Ch.^. V

New York court has held that title is in the continuing
members as joint tenants. ^^ The agreement is not a
perpetuity.^'

It should be noted that the Uniform Partnership
Act recommended by the Commissioners on Uniform
State Laws in 1914 does not apply to non-profit asso-
ciations and so "^"ill not reconcile the conflicting deci-
sions as to the property of such associations.

§ 61. Property of Religious Associations

The htigation that has followed the bitter quarrels
that so often degrade rehgious organizations usually

died before the society was incorporated against the founder and head
of the society. Members on joining signed the constitution, which pro-
vided for common ownership of all property. Held: There was no indi-
vidual ownership in the property of the association. Goesele v. Bimeler,
14 How. 5S9.

^ Plaintiff was member of socialistic community carrying on a can-
ning business for which he was salesman. The covenant he had signed
on coming of age required that if he Hved outside the community he
should turn over to it all his earnings, that any member could retire at
any time, but thereby forfeited all right in the propertj* of the society.
Plaintiff disagreeing with pohc^- of society' went to work for rival can-
nen,' but declared that he retained his membership and right to retvun
when he chose and that if he did so he would bring aU his earnings with
him, but that in meantime he would retain them. Later all business
carried on by the society- was turned over to a corporation in which
members took stock. Society not formally dissolved. Members had
voted that plaintiff had voluntarily withdrawn. Held: Plaintiff had
voluntarily left the societj- and ceased to be a member, hence he has no
right in the property or to claim that there has been a dissolution. His
disclaimer of ^\nthdrawal is insufficient, for his work for a rival business
was inconsistent with membership. The agreement regarding property
was not illegal. "It was a joint holding of property by the adult mem-
bers of the conununity with this quahfication, that upon the death or
withdrawal of a member no share or interest therein passed to him or
his personal representatives, but they who survived or remained con-
tinued to hold jointly the entire property in solidum." "By the terms
of the contract under which that estate was acquired, its duration was
only co-existent with the duration of his membership." (The title to
real estate had been held bv trustees.) Burt v. Oneida Communitv, 137
N. Y. 346, Soo, 33 N. E. .307, .50 N. Y. St. 722, 19 L. R. A. 297, aff'd
138 N. Y. 6-19, .34 X. E. 288, .53 N. Y. St. 24.

" Goesele v. Bimeler, 14 How. .589, 608.

2.54

Chap. V] RELIGIOUS ASSOCIATIONS [§61

has been concerned fundamentally with questions not
peculiar to the law of unincorporated associations, but
rather with applications of the law of trusts. Since reli-
gious organizations are usually unincorporated, and
since the most important decisions on the subject have
arisen out of schisms in unincorporated churches, it
seems desirable to state the results of those decisions
here and show their relation to the general law of non-
profit associations.

To understand these cases it is essential to recall at
the start certain fundamental principles which have
influenced the courts in their decisions.

(a) Courts will not interfere in the internal affairs
of unincorporated associations unless property rights are
involved.^

(6) Civil courts are not equipped to decide ecclesi-
astical questions.^

(c) Courts when forced to pass upon the internal
affairs of associations are bound by decisions of a tri-
bunal constituted by the laws of the association when
within its jurisdiction, because in joining an unincor-
porated association a member agrees to submit to those
laws.^

(d) Other things being equal, the majority rules in
unincorporated associations.'*

(e) When membership in an association ceases,
whether by proper expulsion or voluntary withdrawal,
all rights of the member in its property cease.^

^ See § 58 and § 56, notes 19 et seq.

2 Moseman v. Heitzhusen, 50 Neb. 420, 423, 69 N. W. 957 (vote by
majority to change church affihation. Dispute of factions over church
property).

^ See § 56, notes 14 et seq.; § 58, notes 4 et seq.

* See § 58, note 12.

^ See § 60, notes 44 et seq.

255

§ 61] NON-PROFIT ASSOCIATIONS [Chap. V

(/) Equity will enforce a trust on petition of one
entitled to enforcement regardless of the opposition of
trustees or beneficiaries.^

{g) Funds accumulated by subscription for a specific
purpose are held in trust by the recipient for that
purpose.^

{h) The majority of an association cannot without
unanimous consent authorize acts outside the scope of
the purposes for which it was originally organized.^

In the application of these principles to the issues in
religious litigation courts inevitably have been influ-
enced by their conception of the fundamental import-
ance of doctrinal differences, though always vigorously
protesting that they will not pass upon such questions.
Thus when forced to deal with property rights involved
in the laudable attempts of warring sects to unite and
harmonize those differences in theology which our
fathers claimed to understand, but which to the modern
lay mind seem not worth understanding, some judges
have conceived that where property is acquired without
any express trust attached there is an implied trust that
it be used only for the promotion of the rehgion pro-
fessed by the congregation at the time of its acquisi-
tion. Others have felt that these doctrinal differ-
ences necessitated an application of the doctrine of
ultra vires. Others have been glad to accept the de-
cisions of the church itself as sufficient justification
for the acts complained of.

Religious organizations are of two sorts, the congre-
gational system, in which each church is practically
independent, and the connectional system, in which
each local church is subordinate to higher organizations,

6 Hoc § GO, note 11. ' Soo § 00, note 8. » See § 59.

256

Chap. V] RELIGIOUS ASSOCIATIONS [§61

usually culminating, in the United States, in a national
body. The Supreme Court of the United States has
laid down the rules which it would seem should be ap-
plied in litigation between factions in an unincorpo-
rated church, each seeking control of its material assets.

When property is given expressly in trust to support
some particular doctrine, the congregation cannot by
a change of views carry the property to the support of
the new doctrine.

Where property is held by an independent church
with no trust expressed except that it is for the use of the
society, if there is a schism, the rights in the property
must be determined, as in all associations. If their
principle of government is the rule of the majority,
then the numerical majority must control the property.
If there are officers in whom are vested the power of
control, then those who adhere to the acknowledged
organism by which the body is governed are entitled to
the use of the property. The minority choosing to
separately organize can claim no rights. Where prop-
erty is acquired in any of the usual modes for the gen-
eral use of a church which is itself part of a general or-
ganization of some religious denomination, so long as
any existing rehgious congregation can be ascertained
to be that congregation or its successor, it is entitled
to the property. When this question has been decided
by the highest tribunal in the church legal tribunals
must accept that decision.^

9 Watson V. Jones, 13 Wall. 679, 723, 726.

Dictum in case of corporation that whether uncorporated or not,
property conveyed to it for the support of a particular doctrine is held
as a trust for that purpose which equity wiU enforce. When endowed
as belonging to a particular sect or connection, it cannot break off from
that. When not so described, it may change its relation provided there
be no radical departure from the original faith. The property belongs

257

§ 61] XOX-PROFIT .\SSOCL\TIONS [Chap. V

Trusts that are clearly expressed seldom trouble the
courts. ^° Perhaps for tliis reason cases invohing ex-
press trusts for the support of a particular doctrine are
few. There are cases of gifts to a church described as
affiUated ^ith a specific organization where the niinorit j^
adhering to that affiliation was held entitled to control
its property.^^ Trusts to permit preachers of a specific
denomination ^- or certain members of a specified de-
nomination^^ to use it and trusts for a congregation in a

to those who act in accordance with the law of the church, though a
minoritv. Schnorr's Appeal. 67 Pa. St. 1.3S, 146. Ace. Roschi's Appeal,
69 Pa. St. 462, 468; Ramsey's Appeal 88 Pa. St. 60, 63.

10 Xance v. Busby, 91 Tenn. 303, 313, 18 S. W. 874. (Dic-
tiun of Lurton, J., in support of first proposition of Watson t'.
Jones.)

If a gift is to be made in trust to propagate any particular doc-
trine of Christianity it must be clearly declared. Attorney General r.
Federal St. 3 Gray 1, 58. See Xance v. Busby, 91 Tenn. 303, 313,
18 S. W. 874.

" A conyeyance was made to trustees for the use of the congregation
of Methodist Protestants. Later the denomination tried to unite with
the Methodist Episcopal Church South. A majority of the congrega-
tion voted to join the latter and claimed the property as against a
minoritj' adhering to the old congregation. Held: The majority
are not beneficiaries of the trust because not belonging to the
Methodist Protestant church. A statute attempting to authorize
the majority to take oyer the church property is imconstitutional
so far as it attempts to affect said trust. Firdey r. Brent, 87 Va. 103,
108, 12 S. E. 228.

Upon a division in a Lutheran church that had been attached to
H. SjTiod, complainants had yoluntarily withdrawn and attached
themselves to M. SjTiod. Held: Though a majority, they cannot claim
to control property convej'ed to the elders "for use as a church and con-
trolled by the Evangelical Lutheran Church of the Holston Sj-nod"
(p. 183). A sjTiod having once decided in favor of one faction, its e.xec-
utive committee had no authority to change that decision (p. 190).
Rodgers i-. Bennett, 108 Tenn. 173, 65 S. W. 408.

" Feizil I'. Trustees of German ^L E. Society, 9 Kan. 594. 597
(rule that only in matters relating to the temporahties of a church can
courts interfere was affirmed. Brewer, J., allowed mandamus).

" A deefi gave Land to the Methodist Episcopal Church South for
the use of its colorcil members. Many of them separated and organized
the African Methodist Church. They were allowed to use the church
for a time, but now a grouj) of colored members of the former church
sue for pos-session. Held: The trust must be enforced for the benefit
of the jjctitioners. Brown v. Moore, 80 Ky. 443.

258

Chap. V] RELIGIOUS ASSOCIATIONS [§61

specified locality ^'* have been enforced against the will
of a majority of the congregation.

The second proposition of Watson v. Jones, though,
it is submitted, more consonant with sound reasoning,
has not been generally accepted. The courts have re-
peatedly laid down the general rule that in congrega-
tional churches the will of the majority governs,^^ but
when they have had to decide which of two factions in
such a church is entitled to its property, most of the
courts have implied a trust for the support of the par-
ticular doctrine professed by the congregation at the
time of its acquisition and have tried to determine which
faction adhered to that doctrine. ^^ In one case the

^* A trustee of funds raised to support a church in a certain locality
cannot use the funds for support of another church at a distance from it
no matter how many of the congi-egation chose to move to the latter
place. The original church having become incorporated can sue
for an accounting. Presbyterian Church v. Donnom, 1 Dess. 154
(S. C).

A gift to trustees for a certain reUgious society so long as it held a
certain faith "and such as may succeed them forever holding the same
principles" is not terminated when the original society changes its
views and moves away, but the trust subsists for the benefit of any
other society that may be formed holding the specified views. Potter
V. Thornton, 7 R. I. 252, 264. See also Goode v. McPherson, 51 Mo.
126.

16 See § 58, note 12.

18 White Lick, etc. Friends v. White Lick, etc. Friends, 89 Ind. 136;
Hendrickson v. Shotwell, 1 N. J. Eq. 577, 645; True Reformed Church
V. Iserman, 64 N. J. L. 506, 43 Atl. 771; App v. Lutheran, 6 Pa. St. 201,
210; Trustees v. Sturgeon, 9 Pa. St. 321, 331. This same doctrine,
being one of trusts, seems to apply equally to incorporated churches.
Bose V. Christ, 193 Pa. St. 13, 44 Atl. 240; Cape v. Plymouth Church,
130 Wis. 174, 180, 109 N. W. 928; Peace v. Christian Church, 20 Tex.
Civ. App. 85, 91, 48 S. W. 534.

A majority of a Baptist church expelled a minority. The dispute
was over a technical question of theology. The church belonged to
an association of churches. Both parties appealed to it and the minor-
ity was recognized. This decision was advisory only as the churches
were congregational and independent. A dispute over the right to
possess the church property brought the issue to court. The court
below held that the church had always adhered to the doctrine now
followed by the majority and that the majority were therefore entitled
to the property. On appeal, Held: The property of a reUgious con-

259

§ 61] NON-PROFIT ASSOCIATIONS [Chap. V

suit was held barred by laches. ^^ In another the court
refused to interfere with the decision of the church it-
self.^^ Where doctrinal questions were not involved the
decision of the majority was sustained.^^ Many cases

gregation is dedicated to the original doctrine of that congregation
and not even a majoritj' can carry it over to a new doctrine (p. 378).
"As well might it be contended that a banking corporation or associa-
tion by a majority vote of its stockholders or directors could change
its business from banking to insmance business or into that of a rail-
road company against the protest of a minority" (p. 379). It is only
to decide property questions that courts consider issues of doctrine
(p. 364). The decision of the Baptist Association on a question of
doctrine, though advisorj- and not judicatorA', must have a controUing
influence in ci\'Ll courts (p. 383). The majority doctrine was a departure
from the original doctrine of the chm"ch as set forth in the original con-
fession of faith and rules of decorum and the minority are entitled to
the property. On a motion for rehearing the decision was reafiirmed.
\Miile majority rules on minor questions of discipline, it does not on
fundamental questions of doctrine (p. 395). '\Miile no judicial inquiry
can be made as to the expulsion of members by a church so long as it
is done according to the law of the church, the question here is, who
are the church (p. 407). Dissent by one on the ground that there was
some evidence to sustain the finding of the coint below. Smith v.
Pedigo, 145 Ind. 361, 33 X. E. 777.

In Bouldin v. Alexander, 15 Wall. 131, 140, the com-t said: "In a
congregational church, the majority if they adhere to the organization
and to the doctrines represent the church."

An unincorporated congregation may bring a bill in equity against
the church corporation to enjoin diversion of the church property to a
different faith. ^larien v. Evangehcal Congregation, 140 Wis. 31, 121
N. W. 604.

1' Predestinarian Church v. United Church, 139 Ky. 110, 129 S. W.
546 (nineteen years' delajO-

1* Courts will not interfere with the decision of a Baptist church
having congregational organization as to the use of the church by two
factions. Windham v. Uhner, 102 Miss. 491, 59 So. 810. See'Ood-
mundson v. Thingvalla Church, 150 N. W. 750 (N. D.).

1* Hubbard v. German CathoUc Soc, 34 la. 31, 35 (trust fund,
raised for a parsonage, applied to debts).

A schism in a church on doctrinal points resulted in the expulsion
of a minority by the majority and the organization of the minority,
who claimed possession of the church property as representing the
original doctrines accepted by the church at the time the property was
acquired. Held: Botii doctrines seem to be accepted by different
churches of the denomination, so that it cannot be said that the major-
ity by its change of belief has departed from the true doctrine and
therefore no breach of trust has occurred (p. 520). The church is an
independent congregation and therefore the majority rules and those
excluded by vote of the church have lost all interest in the property as

200

Chap. V] RELIGIOUS ASSOCIATIONS [§61

have been disposed of by the settled rule that those
whose membership in the association has been duly
terminated have no rights in its property. Hence
when one faction in a schism has seceded from the origi-
nal church association and organized a distinct asso-
ciation not purporting to be the original church, the
control of the church property has been awarded to
those who could prove the identity of their organiza-
tion with the original association.^" Even where the
seceders had been allowed for years to share the prop-
erty it has been held that their rights were permissive
only.2^ This rule is equally applicable to connectional

beneficiaries. The court must accept the exclusion as vaUd (p. 522).
Bennett v. Morgan, 112 Ky. 512, 66 S. W. 287.

A majority of a Baptist church may vote to move to another town
and take with them all its property except property charged with a
trust for its use at the original site, such as property raised by pubhc
contributions of the citizens of the town. A majority having dissolved
the original church organization by the vote to remove, the minority
have no right to bring an action at law with respect to such property.
McRoberts v. Moudy, 19 Mo. App. 26, 34.

2" This is the ultimate ground of decision in Watson v. Jones, 13
Wall. 679, 734. Ace. Mack v. Krine, 129 Ga. 1, 23, 58 S. E. 184; Hadden
V. Chorn, 47 Ky. 70, 77; Lewis v. Watson, 67 Ky. 228; Fuchs v. Meisel,
102 Mich. 357, 373, 60 N. W. 773 (majority seceded) ; Trustees v. Sea-
ford, 16 N. C. 453, 455; Holt v. Downs, 58 N. H. 170, 181.

Trustees may bring ejectment at law against a portion of the con-
gregation who have formed a separate organization and taken posses-
sion of the property. Fernstler v. Siebert, 114 Pa. St. 196, 204, 6 Atl.
165.

Unless church factions so divide that each claims to be the original
church, the courts will not interfere with disputes in congi'egational
churches. Stogner v. Laird, 145 S. W. 644 (Tex.).

2^ Seceding members of a church formed with others a new congre-
gation. The new church was allowed by the old to use the church
building part of the time for ten or fifteen years. Then it was refused
and the old church brought a biU in equity to compel the new church
to desist from using the building. Held : The new church had no con-
tract right and the injunction should be granted. CahiU v. Bigger, 47
Ky. 211, 214.

Where seceders had been allowed for twenty-nine years to use alter-
nately the old church edifice, their rights were permissive only and
title remained in the original church, which is identified by its adher-
ence to the original doctrines. Hence the new church could not restrain

261

§ 61] NON-PROFIT ASSOCIATIONS [Chap. V

churches. 2- In Kentucky, where this Utigation has been
most prolific, the rule has been applied in cases of expul-
sion of a minority by a majority, and at the same time
the court held that the action of the majority must be
accepted by the courts as conclusive that those ex-
pelled were no longer members.^^ Since expulsion is
usually resorted to in these controversies, this reaUy
begs the question, and, in its reasoning, this case is not
likely to be followed. It has, however, been approved
by the Supreme Court of the United States ^^ and the
result seems in accord ^vith the doctrine of Watson v.
Jones. By statute in Kentucky some of these cases
have been disposed of sensibly by decrees providing
for joint use of the church edifice where neither faction
separately organized. ^^

The third proposition of Watson v. Jones is that the
property of a church which is itself part of a superior
church organization is to be controlled by the organiza-
tion which can be identified as the same branch of the
parent organization and that the decision on this point

the old church from tearing dovm and replacing the church edifice.
Appeal of Landis, 102 Pa. St. 467, 473.

22 Godfrey v. Walker, 42 Ga. 562, 571.

If the original congregation is kept up even by a minority they cannot
be divested of the property by a separate organization of seceders.
Harper v. Straws, 53 Ky. 48, 55; McKinney v. Griggs, 68 Ky. 401, 409.

23 Shannon v. Frost, 42 Ky. 253, 258, 262. Followed in regard to
parsonage acquired in the names of some of the majority who separated
from the old church and the Methodist Church South. McKinney v.
Griggs, 68 Ky. 401, 408. But an excommunication of a majority of a
local cliurch by a General Assembly without trial was held invalid and
so the property was awarded to the majority faction. Watson v. Gar-
vin, 54 Mo. 353, 381.

^ "We must take the fact of excommunication as conclusive proof
that the persons ex.scindcd are not members. But we may inquire
whether the resolution of expulsion was the act of the church or of per-
sons who were not the church and who consequently had no right
to excommunicate others." Bouldin v. Alexander, 15 Wall. 131,
140.

" Gartin v. Pennick, 68 Ky. 110; Poynter v. Phelps, 111 S. W. 699.

262

Chap. V] RELIGIOUS ASSOCIATIONS [§61

of the highest tribunal of the church is to be accepted as
final. This reduces the legal problem to one of identity
and furnishes a simple solution, since in almost all such
cases the church tribunal will have rendered a decision.
Although there are a few decisions that seem opposed
to it,^^ and some the effect of which is not clear,^^ most

2^ A bill to enforce a trust of church property. The church had with-
drawn from the synod with which it had been connected. Held: The
evidence did not establish that the property was held in trust to main-
tain a permanent connection with that synod. Heckman v. Mees, 16
Ohio St. 583, 589.

Held : That the connection of a Presbyterian church with a presby-
tery is voluntary and may be withdrawn, and hence that in this country
if a Presbyterian church changes its religious connection, it does not
forfeit its trust property. Attorney General v. Federal St., 3 Gray 1,
54.

A Lutheran church changed its synod and a minority withdrew be-
cause of this and because of objection to certain doctrinal practices.
They bring a bill to enjoin the majority from use of the church. Held:
In the absence of some other established rule, it was sufficient that these
changes were made by a majority. "The members of the society are not
to be treated as partners entitled to a division of the property on a disso-
lution of partnership because of the dissatisfaction or withdrawal of a
minority, but they are jointly associated for the common purposes;
and as long as the property is appropriated to such purposes, and none
are prevented from participating in such use thereof, there is no
good reason why the views of the majority should not control in
the management thereof in the absence of a different rule lawfully
established or existing." Schradi v. Dornfeld, 52 Minn. 465, 473, 55
N. W. 49.

2' Unless the usages of a church authorize the withdrawal of an indi-
vidual church from the general organization without its consent, a
minority adhering to the old church affiliation under such circumstances
will be held entitled to the church property, but if the usages of the
church are proved to permit such separation without mutual consent,
the majority would be entitled to the property. Vasconcellos v. Fer-
raria, 23 111. 456, 27 111. 237. On another trial the evidence as to right
of withdrawal was conflicting. Held: Regardless of the right to with-
draw, both parties were beneficiaries before withdrawal and continued
to be after it. Church ordered sold and proceeds divided pro rata be-
tween the two factions. Ferraria v. Vasconcellos, 31 111. 25, 53.

When persons join a church belonging to a general organization they
assent to its laws and are entitled to the impUcation that the affairs of
the church are to be managed according to them. When the general or-
ganization extends over several States, that in one State may refuse
to obey the rest without being chargeable with secession (p. 14). " Union
among churches is a perfectly legitimate part of their purpose and of
their freedom and mutual concession is part of the natural law of it

263

§ 61] NON-PROFIT ASSOCIATIONS [Chap. V

cases are in accord.^^ This rule has been generally ac-
cepted in two series of cases that have come before the
courts of many States, arising first from the dissen-
sions over the revision of the confession of faith of the
United Brethren,^^ and more recently from the union

which we cannot direct or Umit " (p. 27) . "Law deals with short periods
in its administration and with indi\'iduals and societies under govern-
ment and expects to find social unity continued without any violent
rupture of forms or departure from principles and yet makes all rea-
sonable allowances for development according to principles and with
due respect for customarj^ forms" (p. 29). The majoritj^ of a church
that accepted a union of two church organizations was held not to have
departed from the fundamental principle of its organization and is en-
titled to its property as against the minority (p. 29). McGinnis v. Wat-
son, 41 Pa. St. 9.

^* First Presbj'terian Church v. Wilson, 77 Ky. 252, 268; Simmons
V. AUison, 118 N. C. 761, 770, 23 S. E. 716; Greek Church v. Greek
Church, 195 Pa. St. 425, 435, 46 Atl. 72; Cape v. Plymouth Church,
117 Wis. 150, 1.56, 93 N. W. 449.

A rector of a Protestant Episcopal church by virtue of his office has
a right to enter into the church edifice, such right being in the nature of
an easement. This is the law of the church, the effect of the contract
made in giving him a call whether the church be incorporated or not.
Lynd v. Menzies, 33 N. J. L. 162, 167.

29 A national church organization revised its confession of faith. The
members of one church in the denomination divided over the question
and the minority claimed title on the ground that those adhering to the
new confession had left the church. Held: The provision of the old con-
stitution that amendment must be "on request of two-thirds of the
whole society" is comphed with though the bishop initiated the change
and submitted the question to vote. Two-thii-ds of those voting is suf-
ficient (p. 410). The decision of the church tribunal on matters of doc-
trine is conclusive on ci\'il courts (p. 413). Equity will not interfere to
enforce the trust of church property in such case unless the change in
fundamental theological doctrine is clear (p. 415). Kuns v. Robertson,
154 111. 394, 40 N. E. 343. Ace. Lamb v. Cain, 129 Ind. 486, 513, 516,
29 N. E. 13. Ace. (on the first point) Russie v. Brazzell, 128 Mo. 93, 107,
109, 30 S. W. 526; Schlichter v. Keiter, L56 Pa. St. 119, 145, 27 Atl. 45.

Taft, J., agreed with the principles of the Illinois case, but overruled
a demurrer to the bill in equity to enjoin interference with church prop-
erty on the allegation that not sufficient notice of the time to vote had
been given. Brundage v. Deardorf, 55 Fed. 839, 849 (C. C. — Ohio).

The constitution of 1840 of the United Brethren was adopted by the
general conference without submission to the members. It was a vol-
untary limitation on its own authority, but it may be intei-preted, when
anibiguouH, by the same body that created it (p. 223). The conference
could determine the details of the procedure and amend the constitu-
tion (p. 225). The jjarticulur question here involved in the claim to the

204

Chap. V] RELIGIOUS ASSOCIATIONS [§61

of the Cumberland Presbyterian Church with the Pres-
byterian Church of the United States. ^° The General

property of the church is one merely of identity, that is, which is the
legal successor of the organization to which the property was conveyed.
As the highest church judicatory, the general conference decided that
the new constitution had been legally adopted. Civil courts must accept
that decision (p. 228). Brundage v. Deardorf, 92 Fed. 214 (C. C. A. —
Ohio).

The later conference had the same power to change the constitution
that the earHer one did to enact it. A constitution by acquiescence is
unknown to American law, but the new constitution at least took effect
as an ordinance of the church. Horsman v. AUen, 129 Cal. 131, 139, 61
Pac. 796.

The contrary result was reached in two States. Two-thirds of those
voting did not comply with the rule. The law as to political elections
does not apply (p. 452). The original constitution was binding (p. 442).
The vote was not a request, and there being no request it was not valid
(p. 454). The decision of the general conference was not a judicial
decision but a legislative one, and so not binding on the courts. It did
not apply a rule as to past actions but laid one down as to future actions
(p. 459). Philomath CoUege v. Wyatt, 27 Ore. 390, 31 Pac. 206, 37
Pac. 1022. Ace. Bear v. Heasly, 98 Mich. 279, 308, 24 N. W. 615 (by a
divided court); Lemp v. Raven, 113 Mich. 375, 71 N. W. 627.

^° The Presbyterian Union was held vahd in Sanders v. Baggerly, 96
Ark. 117, 131 S. W. 49; Harris v. Cosby, 173 Ala. 81, 55 So. 231 (note
curious use of the word "corporation" in the opinion); Morgan v.
Gabard, 176 Ala. 568, 58 So. 902; Permanent Committee v. Pacific, etc.
Church, 157 Cal. 105, 106 Pac. 395; Mack v. Kime, 129 Ga. 1, 25, 58
S. E. 184 (but see apparently contradictory statements on page 20);
First Church v. Fust Church, 245 lU. 74, 91 N. E. 761; Ramsey v.
Hicks, 174 Ind. 428, 91 N. E. 344; Bentle v. Ulay, 175 Ind. 494, 94
N. E. 759; WaUace v. Hughes, 131 Ky. 445, 115 S. W. 684; Carothers v.
Moseley, 99 Miss. 671, 55 So. 881 ; Fust Church v. Cumberland Church,
34 Okla. 503, 126 Pac. 197; Brown v. Clark, 102 Tex. 323, 116 S. W.
361; Horton v. Smith, 145 S. W. 1088 (Tex.).

Tennessee held the union of Presbyterian churches void on doc-
trinal grounds (majority). Landrith v. Hudgins, 121 Tenn. 556, 120
S. W. 783. Such being the law, the property of a given church can be
transferred to the Presbyterian church of the U. S. A. only by unani-
mous consent, i.e., by vote or by acquiescence for so long a time
that an admission from conduct may be inferred. Bonham v. Harris,
125 Tenn. 452, 145 S. W. 169.

But since no rule of property is laid down by those cases the Federal
courts in Tennessee are not bound to foUow them and hold the union
vaUd. Sherard v. Walton, 206 Fed. 562 (D. C. — Tenn.). Hehn v.
Zarecor, 213 Fed. 648, 656 (D. C. — Tenn.); Sharp v. Bonham, 213
Fed. 660, 669 (D. C. — Tenn.). So in Missouri the union was held
invalid. Boyles v. Roberts, 222 Mo. 613, 121 S. W. 805. But contra
in Federal court. Barkley v. Hayes, 208 Fed. 319, 833 (D. C. — Mo.).
See also Hayes v. Manning, 172 S. W. 897 (Mo.).

265

§ 61] NON-PROFIT ASSOCIATIONS [Chap. V

Conference of the former and the General Assembly of
the latter were the supreme judicial as well as legisla-
tive and executive bodies of their denominations. Their
decisions which in each case represented the will of the
majority of their communicants in most of the States
were accepted as final, though frequently there were
qualifications in the opinions which make it doubtful
whether the doctrine of Watson v. Jones was accepted
in its entirety. In two earlier cases regarding a schism
in the Society of Friends this doctrine of Watson v.
Jones seems to have been foreshadowed.^^

In England the highest court has taken a different
attitude towards this question. In the celebrated Free
Chiu*ch of Scotland case, one church desired to com-
bine with another and modified the Westminster Con-
fession to do it. A minority objected and claimed to

51 There may be such a departure from the principles of Quaker-
ism as to destroy the identity of the society and leave its property
derehct (p. 459). The court then considered the evidence and decided
that the Yearly ]Meeting for New England had jurisdiction and had
decided the question and their decision was followed (p. 470). Earle
V. Wood, 8 Cush. 430.

A schism in the society of Quakers came before the court on a ques-
tion of disputed election of a clerk and right to possession of church
property. No question of doctrine seems to have been involved. Held:
The former clerk should have taken the vote of the meeting on the elec-
tion of his successor. "Civil courts in determining the question of
legitimate succession in cases where a separation has taken place in a
voluntary religious society, will adopt its rules and will enforce the
polity in the spirit and to the effect for which it was designed. When
public policy or the positive law of the land is not contravened the de-
cisions and orders of the society, when made in conformity to its polity,
should have the same effect upon the subject to which they relate, in
civil courts, which the society intended should be awarded to them
when pronounced by its own judicatories. If such society is composed
of separate bodies, whether (;oordinated or subordinated, the rules of
the society for th(^ management of its internal affairs and for the adjust-
ment of the relations between its branches constitute the law by which
they should be governcHi." Hence the decisions of various yearly
meetings as to the status of the Ohio Yearly Meeting were entitled to
great weight, and tlie one they recognized is hekl entitled to the trust
estate. Harrison v. Hoyle, 24 Ohio St. 254, 286.

266

Chap. V] RELIGIOUS ASSOCIATIONS [§61

be the Free Church and entitled to its property. The
House of Lords, overruhng the Scottish court, held that
it was ultra vires for any religious body to alter its fun-
damental principles and that the doctrine modified was
of that nature and so the minority were entitled to the
property. All counsel agreed that the question was one
of contract and of trust springing from contract and
the issue really was whether the original contract pro-
vided for authority of the Assembly to modify that
contract.^- There are American cases to the same
effect. ^^

The doctrine of Watson v. Jones has no applica-
tion to the decision of a merely advisory tribunal in
a denomination organized on the congregational
principle.^^

It is to be noted that in most of the cases above cited
the tribunal itself interpreted the scope of its jurisdic-
tion and that its decision on this in some cases was ac-
cepted as final by the civil courts. In one decision at
least the coiu"t asserted the right to determine inde-
pendently in all cases this question of the jurisdiction
of the church tribunal. ^^ This case was criticised in
Watson V. Jones. The court said that the right of
civil courts to question the jurisdiction of church tri-

32 Free Church of Scotland v. Overtown, (1904) A. C 515.

33 Reorganized Church v. Church of Christ, 60 Fed. 937, 953 (C. C.
— Mo.); Smith v. Pedigo, 145 Ind. 361, 379, 33 N. E. 777, 44 N. E.
363.

3* JarreU v. Sproules, 20 Tex. Civ. App. 387, 395, 49 S. W. 904. See
Godmundson v. ThingvaUa Church, 150 N. W. 750 (N. D.).

3^ The order of a synod directing the election of additional ruling
elders of a church was not an exercise of the appellate jurisdiction as a
court of the church. It was not authorized by the constitution of the
church to supersede the local session. Hence the ratification of its
act by the General Assembly was unconstitutional and will not be
recognized by the civil courts as a purely ecclesiastical decision or one
within its jurisdiction affecting property would be. Watson v. Avery,
65 Ky. 332.

267

§ 61] NON-PROFIT ASSOCIATIONS [Chap. V

bunals applied only to attempts by church courts to
deal with personal or civil rights not involving any
ecclesiastical question and that if civil courts go be-
yond this they will be involved in questions they are
unfit to answer.^^

When there has been a voluntary division of a church
organization by proper authority neither organization
can claim to be the original organization and each re-
sulting church is entitled to a share in the property of
the original association." Where the original organiza-

36 Watson V. Jones, 13 WaU. 679, 733.

3^ In 1844 the general conference of the Methodist Church adopted
a resolution authorizing the Southern annual conference to set up as
a separate organization. They did so and now sue for a pro rata divi-
sion of the Methodist Book Concern, a fund for superannuated and
other preachers estabhshed by contributions from the entire church.
Held : The general conference had the power to make the division and
neither part resulting is entitled more than the other to claim to be
the original association (p. 306). The power was inherent in the gen-
eral conference which originally founded the church (p. 307). There
having been a division of the church by proper authority, that carried
with it a division of the common property of the organization, includ-
ing the Book Concern (p. 308). Nothing short of an agreement by the
church South to surrender its rights in the Book Concern would pre-
clude an assertion of its rights. Hence the fact that certain articles of
the constitution were thought to interfere with a division of the Book
Concern and that a plan Was provided to get consent of all the con-
ference to waive this, which plan was never executed, makes no differ-
ence (p. 309). Division ordered in proportion to the number of bene-
ficiaries in each church at the time of separation. Smith v. Swormstedt,
16 How. 288. Ace. Bascom v. Lane, Fed. Cas. No. 1089 (C. C. —
N. Y.).

Minor differences having arisen in a congregation, they divided and
trustees of the original church conveyed an undivided half interest in
the church property to trustees of the new church. Ilekl: The trustees
were authorized to make this division. The property had been ac-
quired by contributions of the members. There was no secession, but
a voluntary division. Having been acquiesced in for four j^ears, it
should not be disturbed. Wicks v. Nedrow, 28 Neb. 386, 388, 44 N. W.
457.

Two religious societies agreed on joint ownership of church school
and burial ground. The land had originally been conveyed to trustees
for one. Tliey now H(!ok i)artition. Held: While the trustees had no
right to cliang(! \\u\ l)eneficiaries, the bcuieficiiaries could tliemselves
ratify such a change. The two associations, under Pennsylvania

208

Chap. V] DUES [§ 62

tion decided that congregations in certain localities
might choose which of the subsequent organizations
they would affiliate with, the property of those con-
gregations followed the determination of the major-
ity.^^ Thereafter, however, they became subject to
the laws of the branch with which they affiliated.^^

§ 62. Dues

Difficulties arise when an association attempts to
collect dues by legal process. The problem was in sub-
stance declared insoluble in one case,^ but the English

statutes, had many of the quaHties of corporations. They became
tenants in common and partition would be appropriate, but here de-
nied in discretion of court because impracticable to sell the graveyard
at auction. Brown v. Lutheran, 23 Pa. St. 495, 500.

38 The Methodist Church divided into the Methodist Church
North and the Methodist Church South and fixed territorial Une but
allowed the border churches to decide which general conference they
would adhere to. Held: This was a vahd act of the church and a
majority of one of the border churches could decide to adhere to the
Methodist Church South even if the Kentucky conference decided the
other way. The minority having separated from the rest, have lost
their right to use the church property. Deeds construed to refer to
the church at that locahty regardless of the conference adhered to.
Gibson v. Armstrong, 46 Ky. 481, 527. Ace. Humphrey v. Burnside,
67 Ky. 215.

39 Brooke v. Schaklets, 13 Grat. 301, 323 (Va.).

The Baltimore conference of the Methodist Church adhered to the
Northern organization under the plan of separation of 1844. When the
war broke out it voted to join the church South. Held: Property held
in trust for its churches must be used for the benefit of churches
that continued to adhere to the church North, because the plan
of 1844 did not contemplate any further division after the first.
Hoskinson v. Pusey, 32 Grat. 428, 436; Venable v. Coffman, 2 W. Va.
310, 324.

^ Action by treasurer of cadets for fees and assessments. Members
on joining coips signed articles of association promising to pay treasurer
such fees and assessments. Held: Action cannot be maintained. It
was not a promise to the plaintiff, but reaUy a prornise to the treasurer
for the time being or the then treasurer or his successors. Such a
promise cannot be enforced. No consideration, because it did not ap-
pear that the treasurer had incurred any expense on the faith of the
promise. "The difficulty in this case arises from an attempt made to
enable an association of individuals frequently shifting and changing

269

§ 62] NON-PROFIT ASSOCIATIONS [Chap. V

court did not hesitate to allow a representative of the
association, designated by its rules for that piu-pose, to
sue for arrears. 2 A different problem arises when the
payment to be collected is not an assessment provided
for by the rules of the association and assented to in
advance by joining the association, but is merely a sub-
scription made voluntarily for the purposes of the asso-
ciation. The problem in sucli cases belongs rather in
the law of contracts than that of associations.^ A bill
in equity against all subscribers who attended a public
meeting was dismissed because the causes of action were
separate.^

to have rights of succession and other attributes of a corporation."
Warren v. Stearns, 19 Pick. (Mass.) 73, 76, 78.

2 Plaintiff was master of the "Cocoa Tree Chib." Rules required a
subscription to be paid every year, and if no notice was given of an in-
tention to discontinue they were to be considered members and the
master was empowered to coUect "house bills." Held: Every member
must be considered debtor to the master for arrears unless he can show
prior notice to discontinue. Raggett v. Bishop, 2 C. & P. 343, 31 Rev.
Rep. 668, 12 E. C. L. 607. See also Raggett v. Musgrove, 2 C. & P.
556.

^ The trustees of a rehgious society which has never been incorpo-
rated may bring suit on a subscription made at a church meeting on
Sunday by mutual promises though no payee is named in the subscrip-
tion paper. Allen v. Duffie, 43 Mich. 1, 4, 4 N. W. 427, 38 Am. Rep.
159.

Action at law by the building committee of a church on a subscrip-
tion by a member of a congregation. Held : In England the remedy
would he only in equity because the promise was to no particular person
or persons by name. As equity jurisdiction has been restrained the
court will waive technicahties and allow the action for the purpose of
doing justice. Chambers v. Callioun, 18 Pa. St. 13.

By statute the contract of a voluntary rehgious society with its
members was made binding. A society sued in its association name a
member on a subscription contract. Held : By failing to pay dues or
ceasing to believe that religion he is not discharged from his contract.
(Query, if coqwration.) Congregational Soc. v. Swan, 2 Vt. 222, 229.

■• Cheney v. Goodwin, 88 Me. 563, 569, 34 Atl. 420.

A subscriplion to build a road payable to a designated "treasurer of
the road fund" was a trust fund of which a receiver could hv, ai)pointed
on a creditor's \)i\\, who could in the right of the treasurer and the
other Hub.s<;riberH collect unpaid subscriptions. Rousseau v. Call, 85
S. E. 414 (N. C).

270

Chap. V] DUES [§62

There is apparent confusion in the decisions as to the
right of an association to increase its dues without the
consent of its members. It would seem that in the ab-
sence of contract rights of members, such as are involved
in fraternal insurance, an association must have an in-
herent right to increase its dues if the increase is not
retroactive. But it has been held in England that a
social club cannot raise the dues of members without
unanimous consent where the rules do not provide for
action by a majority.^ As to contract rights, the ques-
tion must be whether the by-laws are made part of the
contract and whether the right to increase dues is re-
served in the by-laws either under the power to amend
or otherwise.^ After a benefit has accrued under such

5 Harrington v. Sendall, (1903) 1 Ch. 92. See Wise v. Perpetual Trus-
tee Co., (1903) A. C. 139.

^ Action on a benefit certificate. Defense that not member because
did not pay assessments. Issue on validity of assessments modifying
the original contract. Held: Invahd assessments because could not
enforce the contract without consent of all contracting parties. "Not
being incorporated its wi'itten articles of association constitute a contract
by which the duties of its officers, the duties and obligations of its mem-
bers among themselves and the scope of its business are to be defined
and regulated. Its articles of association bear to it the same relation
that a charter bears to an incorporated society and constitute its funda-
mental law, in accordance with which all subsequent by-laws, regula-
tions and amendments must be made." Hogan v. Pacific Endowment
League, 99 Cal. 248, 256, 33 Pac. 924.

Action on benefit claim. Defense, change in by-laws. Held : "It has
been held in this court on more than one occasion that in respect to the
by-laws of a voluntary association the court has no constitutional power,
and cannot determine whether they are reasonable or unreasonable,
and the only question it can examine is whether they have been adopted
in the way which has been agi-eed upon by the members of the associa-
tion." Kehlenbeck v. Logeman, 10 Daly (N. Y.) 447, 448. Ace. Cun-
niff V. Jamour, 65 N. Y. S. 317, 31 Misc. (N. Y.) 729; Uhner v. Mues-
ter, 37 N. Y. S. 679, 16 Misc. 42, 73 N. Y. S. 260.

An unincorporated mutual benefit association may amend its by-
laws reducing the amount of an accrued benefit. By-laws may be
amended by the enactment of changes of a mere regulative kind not
inconsistent with the fundamental scheme of the association. Mar-
shall V. Pilot's Ass'n, 18 Pa. Sup. Ct. 644.

Unincorporated benefit society incorporated after plaintiff's hus-

271

§ 62] NON-PROFIT ASSOCIATIONS [Chap. V

a contract no subsequent modification of the con-
tract should be permitted so far as that payment is con-
cerned.'^ The contract involved in membership in these
associations is to be interpreted like other contracts,^
and when the meaning is ascertained, is to be enforced,
so long as not illegal or immoral, whether the court
thinks it reasonable or not.^ Where the constitution
of a union provided for the forfeiture of instalments of
the initiation fee if false statements were made in the
application, the court allowed the plaintiff to recover
the amount when the statements objected to were as
to her earning capacity.^"

band became member, but apparently that made no difference. She
claimed a benefit and objected to a change in by-laws reducing amount.
Held: In nature of these assessment societies the rate may be changed,
especially when it is provided that the by-laws may be amended. Fugure
V. BurUngton St. Joseph's Mut. Soc, 46 Vt. 362, 370.

He cannot recover the benefits of the amendment and repudiate its
obUgations. Berg v. Unterstutzungs Verein, 86 N. Y. S. 429, 90 App.
Div. 474.

"> Poultney v. Bachman, 10 Abb. N. Cas. (N. Y.) 252. See Kehlen-
beck V. Logeman, 10 Daly 447, 448 (N. Y.).

* The doctrine that a partnership may make its own laws and that
these wiD be enforced by courts does not permit it to construe these con-
tracts in other than their plain Enghsh meaning. Wiggin v. Knights of
Pythias, 31 Fed. 122, 124 (C. C. — Tenn.).

^ Action for benefit against treasurer of labor union. Constitution
provided that if in arrears three months, right was forfeited. It was
claimed this proviso was unreasonable. Held: "Here the defendant
is a voluntary association and the proviso is contained in the constitu-
tion subscribed by its members. That constitution is the contract be-
tween the parties, and if its provisions are not illegal, immoi'al or con-
trary to pubhc pohcy it must be upheld whether reasonable or not, for
parties have the right to enter into unreasonable or unwise contracts
8o long as such contracts are not illegal and arc fairly made. This is the
distinction between the case of a voluntary- association and a corpora-
tion." Hess V. Johnson, 58 N. Y. S. 83, 41 App. Div. 465.

Unusual form of certificate of membership in a Board of Trade with
membership fee and trust fund for redemption of certificates. Admin-
istrator of a deceased member could maintain bill in equity for redemp-
tion of the certificate by the association. Halbcrt v. Traders' Exchange,
173 111. App. 220, 233.

'» U-vin V. Cosgrovc, 75 N. J. L. 344, 67 Atl. 1070.

272

Chap. V] MUTUAL OBLIGATIONS OF MEMBERS [§ 63

§ 63. Mutual Obligations of Members

It is said that one member of an association owes no
fiduciary obligation to the others, such as one partner
owes another.^ On the other hand, a member has ho
right to sue for his share of the property of the associa-
tion on the ground that its purpose has failed without
joining all members in a final accounting as in partner-
ship.2 It has also been held that one member cannot

' Hence if he gets a lease of land the club had occupied for ten years
for tennis court, he is not to be deemed trustee of it for the association.
Lumbard v. Grant, 71 N. Y. S. 459, 1141, 62 App. Div. 617.

2 Plaintiff at a public meeting of the Friends of Ireland contributed
$100 to the cause. Before the meeting a board of forty-eight directors
had been chosen, who elected defendant treasurer. Defendant under
advice of directors invested money in stocks. It had not been apphed
yet, but apparently purpose had not failed. Plaintiff sues for money
had and received. Held: Plaintiff cannot recover. Money was received
by directors, not by defendant. He was to pay it out on order of direc-
tors and so does not hold it on any trust for plaintiff. The money having
been invested by order of directors, defendant has no money. Donations
were to a conamon fund and even if plaintiff has right to a share in it on
ground that purpose for which it was raised had failed, his right is only
to his proportionate part after payment of expenses. This involves ac-
counting to which aU contributors are parties. Query, if defendant had
any power of revocation before money was invested. Murray v. Mc-
Hugh, 9 Gush. 158, 167.

Bill by members of an Odd Fellows Lodge against other members for
a declaration that their exclusion from the lodge was illegal and for an
injunction against apphcation of funds of the lodge otherwise than ac-
cording to its rules. Held on demm'rer that the bill did not seek a dis-
solution that the only reUef sought would not be granted without join-
ing parties who would make the case unmanageable and that the court
could not simply make a declaration of right. Demurrer sustained.
Clough V. Ratchffe, 1 De G. & Sm. 164, 180.

Plaintiff was a member of an Odd Fellows HaU Association formed to
raise money to repair and furnish Odd Fellows Hall. Two thousand
dollars was subscribed and transferable certificates for $20 each issued to
the contributors. Plaintiff held several shares. The money was spent
for the purpose designated. The furniture bought was placed in the
hall. The hall was now used by a new lodge, successor to the old.
Plaintiff seeks to require the other members to buy his share, or to
have the furniture sold and his proportionate share paid him. Held:
There is no equity in the bill. It would be a violation of the original
understanding and a breach of faith. Robbins v. Waldo Lodge, 78 Me.
565, 7 Atl. 540.

273

§ 63] NON-PROFIT ASSOCIATIONS [Chap. V

sue another at law on a contract of the association.'
As previously stated, courts decline to interfere in the
internal affairs of associations unless property or civil
rights are involved."* A member of a mutual insurance
association may bring a bill in equity against its officers
to compel them to levy an assessment as required by
his contract.^ Members who make advances for the
association for work within the scope of the associa-
tion may bring a bill in equity for contribution against
the other members even though they did not expressly
authorize it, but they must be members of a determi-
nate association and not merely attendants at a public
meeting.^ Statements made by a member regarding
another in the course of the business of the association
are "prima facie privileged. '^ Members are not liable

* Association to build a meeting house. Held : One member cannot
sue others at law for labor done. Cheney v. Clark, 3 Vt. 431, 435, 23
Am. Dec. 219.

A boating club contracted with the commodore to build a boat and
paid him. It proved defective and he agreed to build another. Action
at law by some of the members in own right and as assignees of other
members, but not of all members apparently. Held: Though not
strictly partners, "the rights of the associates in the property and the
modes of enforcing them are not materially different from those of
partners in the partnership property. '^ Prima facie the interest of
each associate in the property and effects of the association is equal or
proportionate. No associate has an interest therein which can be sep-
arated and taken out of the whole for his sole use until tlie joint affairs
ar(^ settled, the association dissolved, the mutual rights of the members
adjusted and the ultimate share of each determined." Hence no action
at law against the defendant, a member. McMahon v. Rauhr, 47
N. Y. 67.

" Bennett v. Kearns, 88 Atl. 806 (R. I.).

^ Kimball v. Lower Columbia Ass'n, 67 Ore. 249, 135 Pac.
877.

« Cheney v. Goodwin, 88 Me. 563, 568, 34 Atl. 420. Apart from
provisions in the ruk's, the trustees of an ordinary social club have a
riglit of indemnity against individual meinb(>rs for money jjcrsonally
cx])('nd(d in jjaying club debts. Wise v. Perpetual Trustee Co., (1903)
A. C. 139.

' Stattunc^nts made by a member of an association to a superior officer
about a matter of interest to the organization are i)rivik'ged if made in

274

Chap. V] LIABILITY OF MEMBERS [§ 64

for enforcing the rules of the association.^ Courts of
equity have jurisdiction of such cases because there
is no adequate remedy at law. Mandamus is not the
appropriate remedy to regulate the affairs of an unin-
corporated association.®

§ 64. Liability of Members

The striking distinction between associations for
profit and non-profit associations is in the basis of liabil-
ity of individual members for association obligations.
All members of a partnership are personally liable for
partnership debts. In the kind of association now
under consideration, only those members are liable who

good faith. O'Donaghue v. McGovern, 23 Wend. 26, 31 (church); Bar-
baud V. Hookham, 5 Esp. 109 (military company); Maitland v. Bram-
well, 2 F. & F. 623 (subscriber to charity to the committee of manage-
ment) (but not if to other subscribers, Hoare v. Silverlock, 12 Q. B.
624; see Martin v. Strong, 5 Ad. & E. 535). So of statements to an-
other member in the course of proceedings of the association. Jarvis
V. Hatheway, 3 Johns. 180 (church); Fairchild v. Adams, 11 Cush.
549, 559 (statement by member of ministers' association as to reason
for his vote); Shurtleff v. Stevens, 51 Vt. 511, 501, 515 (ditto); Farns-
worth V. Storrs, 5 Cush. 412, 416 (reading sentence of excommunication) ;
Landis v. Campbell, 79 Mo. 433, 440 (reading resolution); Lucas v.
Case, 72 Ky. 297, 302 (report) ; York v. Pease, 2 Gray 282, 284 (defense
at hearing); Remington v. Congdon, 2 Pick. 310, 315 (ditto. Defendant
a non-member). So of publication of sentence in a church paper.
Redgate v. Roush, 61 Kan. 480, 483. On the facts held not within
above rules. Shurtleff v. Parker, 130 Mass. 293, 297; Lovejoy v. Whit-
comb, 174 Mass. 586, 588; Hocks v. Sprague, 113 Wis. 123, 132; State
V. Bienvenue, 36 La. Ann. 278, 383; Gilbert v. Crystal Lodge, 80 Ga.
284, 4 S. E. 905.

^ Plaintiff insisted on sitting at a camp meeting in the place re-
served for women. He was removed and detained and brings action
for false imprisonment. Held: The rules of the society were admissi-
ble in mitigation of damages. They may prescribe such rules as they
think proper for preserving order at meetings. If after notice defendant
refused to comply, they had the right to use necessary force to remove
him. McLain v. Matlock, 7 Ind. 525, 528.

9 State V. Cook, 119 Minn. 407, 138 N. W. 432. See Lahiflf v. Ben.
Soc, 76 Conn. 648, 57 Atl. 692. It was assumed to be the proper
remedy in Raych v. Hadida, 130 N. Y. S. 346, 349, 72 Misc. 469. See
§ 56, note 28.

275

§ 64] NON-PROFIT ASSOCIATIONS [Chap. V

expressly or impliedly with full knowledge authorize or
ratify the specific acts in question.^

1 Matter of St. James Club, 2 De G. M. & G. 383, 390, 16 Jur.
1075 (social club); Wood v. Finch, 2 Fost. & Fin. 447 (club to buy
coal at wholesale for members); Fleming v. Hector, 2 Gale 180, 2 M. &
W. 172 (ditto); Delaunej^ v. Strickland, 2 Stark. 416, 3 E. C. L. 470
(social club); Hawke v. Cole, 62 L. T. Rep. n. s. 658 (navj^ mess);
Overton v. Hewett, 3 T. L. R. 246, 248 (member of managing com-
mittee of club); Fox v. Narramore, 36 Conn. 376, 382 (miUtarj' com-
pany); Davidson v. Holden, 55 Conn. 103, 112, 10 Atl. 515 (coopera-
tive store); Augusta Club v. Cotton States, etc. Fair Ass'n, 50 Ga.
436, 442 (committee of arrangements of a fair) ; Murray v. Walker, 83
la. 202, 48 N. W. 1075 (assisting in holding a fair. Liable for prizes) ;
Schumaker v. Sumner Tel. Co., 161 la. 326, 142 N. W. 1034, 1037
(members of a farmers' telephone hne not hable on a note in name of
association); Newell v. Borden, 128 Mass. 31 (fire engine company.
Vote at meeting); Volger v. Ray, 131 Mass. 439 (poultry association.
Liability for prizes); Ray v. Powers, 134 Mass. 22 (ditto); Ferris v.
Thaw, 5 Mo. App. 279, 286 (Masonic lodge); Hammerstein v. Parsons,
38 Mo. App. 332, 335 (benefit certificate) ; Riffe v. Proctor, 99 Mo. App.
601, 608, 74 S. W. 409 (church); Hornberger v. Orchard, 39 Neb. 639,
642, 58 N. W. 425 (social club); Sizer v. Daniels, 66 Barb. 426, 433
(pohtical committee); Hosman v. Kinneallj-, 86 N. Y. S. 263, 43 Misc.
76 (see 90 N. Y. S. 357) (sociahstic labor party. Action by employee
of a newspaper conducted by trustees and supported by fixed con-
tributions from members); Lightboume v. Walsh, 89 N. Y. S. 856, 97
App. Div. 187; Siflf v. Forbes, 119 N. Y. S. 773, 135 App. Div. 39 (loan
to socialist labor party); Devoss v. Graj', 22 Ohio St. 159, 169 (trustees
of a church); Eichbaum v. Irons, 6 Watts & S. 67 (Pa.) (dinner com-
mittee appointed at a pubhc meeting); Ash v. Guie, 97 Pa. St. 493,
498 (Masonic lodge); Winona Lumber Co. v. Church, 6 S. D. 498, 503,
62 N. W. 107 (trotting park); .Arkins v. Dominion Live Stock Asso-
ciation, 17 Ont. Pr. Rep. 303, 305 (club).

Business agent of a labor union made contract with plaintiff for
use of union label which union later broke. He sued individual mem-
bers of the union. Held: Cannot sue them as individuals. Hint that
proper remedy is equity to reach funds of union. Eliriich v. Willenski,
138 Fed. 425.

Members of a church signed a call to a pastor agreeing to pay him
$1,000 per year. He performed the services. The signers were held per-
sonally liable. Thompson v. Garrison, 22 Kan. 766. Contra, Paddock v.
Brown, 6 Hill 530 (N. Y.). See Neill v. Spencer, 5 111. Apjx 461, 472.

After foreclosure of a church mortgage a bill was brought under the
code to collect the balance of the debt from the members of the church
without alleging their autliorization of the indebtedness. Held: Bill
dismi-s-scid. Such an as.sociation is not a partnershij) witliin the mean-
ing of the code. Its members are not individually liable for its debts
unless authorized or ratified. First Bank v. Rector, 59 Neb. 77, 79,
80 N. W. 2(i9.

Action against a large number of members of an unincorporated

270

Chap. V] LIABILITY OF MEMBERS [§ 64

This rule has been strictly applied in a suit by a
trustee of an unincorporated club against a member
for indemnity against a liability on a lease incurred
solely by reason of his acting in the capacity of trus-
tee. The English privy council made an exception to
the rule which it had previously laid down in regard to
like actions by trustees of associations for profit,- and
held that because of the rule that members of clubs
inciu- no individual hability beyond their subscriptions
unless they in fact authorize or ratify the act imposing
the obligation, the trustee could not enforce a right to
indemnity against the defendant merely because of the
fact of membership.^

The fact that the defendant made payments on ac-
count as treasurer was held not ratification so as to

congregation of Roman Catholics on an account stated between a
former priest represented by the plaintiff and his successor and others
alleged to be authorized by the defendants to represent the congre-
gation in such matters. Held: The habihty is not based on partner-
ship but on agency and the defendants are bound not because of mem-
bership but because of authorization or ratification. Sheehy v. Blake,
72 Wis. 411, 414, 416, 39 N. W. 479. Evidence was held sufficient to
show authorization or ratification. Sheehy v. Blake, 77 Wis. 394, 399,
46 N. W. 537.

Action on a note given for church furniture sold by plaintiff. The
note was signed individually by two who wrote after their names
"Deacons Mount Carmel Church." The action was brought against
them and the trustees of the chvu-ch in their official capacity. Held:
An unincorporated association cannot be sued as such. The members
who incur the hability or later assent to or ratify it are hable as in-
dividuals. Burton v. Grand Rapids Co., 10 Tex. Civ. App. 270, 31
S. W. 91.

In one case it was said that the hability was that of partners but
because it was a non-trading partnership there was no imphed author-
ity to issue notes (farmers' telephone line) ; Schumaker v. Sumner Tel.
Co., 161 la. 326, 142 N. W. 1034. See similar loose language in regard
to a rehgious community. Teed v. Parsons, 202 111. 455, 460, 66 N. E.
1044, and a college fraternity, Korsted v. WlUiams, 80 Wash. 452,
457, 141 Pac. 887. Members of a church have even been said to be
"Hable on its contracts as joint promissors or partners." Thurmond
V. Cedar Sprmgs Church, 110 Ga. 816, 36 S. E. 221.

2 Hardoon v. Behhos, (1901) A. C. 118, 125.

» Wise V. Perpetual Trustee Co., (1903) A. C. 139, 149.

277

§ 64] NON-PROFIT ASSOCIATIONS [Chap. V

bind him as an individual member.^ Ratification by a
national convention of a political party did not amount
to ratification by the individual members of that party.^
The mere fact of membership and payment of dues is
not enough,^ nor attendance at a meeting at which were
read and approved the minutes of the former meeting
that ratified the act of a committee.^ But knowledge
that the plaintiff was performing her part of the con-
tract was sufficient.^ Publication from time to time
to members of a church of a liability to its pastor for
unpaid salary and loans after an accounting with him
was held sufficient evidence to warrant a finding of rati-
fication.^ Of course if the contract was made before a
member joined an association, ^° or after he retired,"

4 Devoss V. Gray, 22 Ohio St. 159, 169.

5 Siff V. Forbes, 119 N. Y. S. 773, 135 App. Div. 39.

6 Lightbourne v. Walsh, 89 N. Y. S. 856, 97 App. Div. 187 (associa-
tion pubhshing a newspaper).

7 Meriwether v. Atkin, 137 Mo. App. 32, 37, 119 S. W. 36 (lodge).

Contract by a printer against members of a college class for print-
ing of a volume on a written contract with A, who had been elected
by the class business manager of the pubhcation. There was evidence
that the plaintiff gave credit to the class. Judgment for plaintiff.
Held: "It was competent for the coiu-t to infer from aU the evidence
that the defendants who were present at the class meeting at which
it was voted to pubhsh a volume to be called 'The Brown and Blue'
either voted to publish the volume or assented to the vote. This is
true of the vote by which Arnold was elected 'business manager of the
publication.' The contract made by Arnold was apparently within
the scope of his employment, at least the court will so find." Willcox
V. Arnold, 162 Mass. 577, 578, 39 N. E. 414.

8 Heath v. Goshn, 80 Mo. 310 (board of regents of a school).
Members of a lodge who attended meetings in a hall hired for it by

its trustees without express authority must be held to have ratified the
contract though they did not know the terms of the lease. "He may
ratify by voluntarily assuming the risk without in(|uiry or he may de-
liberately ratify on such knowledge as he ])ossesses without caring for
more." EhrmanntTaut v. Robinson, 52 Minn. 333, 335, 54 N. W. 188.

9 Shceliy v. Blake, 77 Wis. 394, 399, 46 N. W. 537.

10 IIornb(!rger v. Orchard, 39 Neb. 639, 643, 58 N. W. 425 (social
club); Barry v. Nuckolls, 2 Humph. 324 (Tenn.) (dramatic society.
Rent).

" Rhoads v. Fitzpatrick, 166 Pa. St. 294, 296, 31 Atl. 79.

278

Chap. V] LIABILITY OF MEMBERS [§ 64

he cannot be held to have authorized it. Cases which
have talked loosely as though something less than au-
thorization or ratification would suffice are not likely
to be followed. ^2 There are cases, however, where it was
properly held that the purpose of the association was
such that mere membership necessarily implied au-

12 A citizens' meeting voted to continue a newspaper in Welsh and
appointed J editor and authorized him to find a publisher who was to
be guaranteed by the committee against loss to the extent of £300.
J engaged plaintiff, but no formal guarantee was written. J saw the
resolution. Held: Defendant who attended the meeting is hable.
With the others he should bear the pubhsher harmless to the ex-
tent of £300. Waterlow v. Cotton, 2 AVkly. Rep. 562.

Action for price of a supper ordered by committee of arrangements
appointed by a pohtical club to get up a ball. Held: Though in
ordinary cases of joint contract, if one defendant sets up denial of
the joint contract plaintiff must prove the joint contract and hold
him though other defendants have defaulted. "But when the con-
tract is made on behalf of a firm or an association and the hability of
the firm or association is proved, it is enough for the plaintiff to show
that the persons who appear and defend are members of such firm or
association and so are liable with the other defendants whose member-
ship is admitted." Downing v. Mann, 3 E. D. Smith (N. Y.) 36, 46,
9 How. Pr. (N. Y.) 204.

An unorganized club without constitution or by-laws was held not
a joint stock association under the New York statute. But it was said
that all the members were hable to one who had furnished goods to it
from time to time on the order of its steward, having never been
notified that they had arranged to have the steward buy for himself
and then sell to them. Park v. Spaulding, 10 Hun 128.

The members of a mutual benefit association are personally liable
for the benefit provided by the court and by-law and because under
statute beneficiary may sue the association by its officers. Strauss v.
Thoman, 111 N. Y. S. 745, 748, 60 Misc. 72.

After Harrison was elected a meeting was held and appointed a com-
mittee to arrange a dinner. Held: He can recover. Non-joinder of
others of committee not pleaded in abatement. Defendants were not
agents of a club. "A club is a definite association organized for in-
definite existence; not an ephemeral meeting for a particular occasion
to be lost in the crowd at its dissolution." All defendants who concurred
in the order are liable. Some who at first objected but finally yielded
are still hable. "Every member present assents beforehand to what-
ever the majority may do and becomes a party to the acts done, it
may be, directly against his will. If he would escape responsibility
for them he should protest and throw up his membership on the spot."
(Gibson, J.). Eichbaum v. Irons, 6 Watts & S. (Pa.) 67, 40 Am. Dec.
540.

279

§ 64] NON-PROFIT ASSOCIATIONS [Chap. V

thorization of contracts such as that in suit.^^ Members
who authorize or ratif}' are hable whether or not they
intended to become Hable or understood the law.^^ If
the plaintiff agreed that the members should not be in-
dividually bound, they are not liable/^ and likewise if
it was agreed that the plaintiff should look only to a
certain fund for pa\TQent>^ In equity the members

13 Lawler v. Murphy, 58 Conn. 294, 313, 20 Atl. 457 (benefit cer-
tificate) ; Cheney v. Goodwin, 88 Me. 563, 567, 34 Atl. 420 (association
formed to bring a shoe facton,- to to^\Ti) ; Richmond v. Judj-, 6 Mo. App.
465, 468 (members of a campaign committee may be assumed to know-
that their association will incur expense for meetings) ; L^-nn v. Com-
mercial Club, 31 S. D. 401, 141 X. W. 471 (commercial club); Ridgely
t). Hobson, 3 Watts& S. 118, 122 (Pa.) (members of association formed
to run a pubhc Hbrar\' are hable for books purchased by agent);
Cockerell v. Aucompte, 2 C. B. n. s. 440, 3 Jur. x. s. 844 (club to buy
coal at wholesale for members) ; But see contra, Fleming v. Hector, 2
Gale 180, 6 L. J. Ex. 43, 2 M. & W. 172, where it was said that ex-
press authoritj' to buj' on credit was necessan,- where a fund was pro-
\aded for pajTnent, even though defendant knew the coal was being
bought. Wood V. Finch, 2 Foster & Fin. 447.

At a mass meeting a "Guarantee Committee" was organized to
contract with a promoter to paj' him 870,000 to build a railroad. The
contract was authorized and a sub-committee was appointed to bor-
row money to make the first pajToent. This was done. Later a con-
stitution and by-laws were adopted and officers elected whose powers
were Umited, so that a vote of the association would be necessary to
authorize them to borrow. They renewed their original notes at a
different bank without such vote. The notes were signed by certain
individual members of the association. Action against the makers of
the note. Answer claimed contribution against aU members of the
association. Amended petition joined all members as defendants.
Held: All members of the association were jointly and severally hable.
The original note being authorized, its renewal by officers of the more
formal association required no special authority. The makers had a
right of contribution against tlie other members. Since the contract
with the promoter was for the purpose of carrj-ing out the ver>' pur-
poses of the association, when the work has been done it is too late to
object that defendants were not present at the meeting at which a
substituted contract was expresslv authorized with a construction
company. Hardy v. Carter, 163 S.^V. 1003 (Tex.).

" Lawler v. Murphy, 58 Conn. 294, 313, 20 Atl. 457 (benefit asso-
ciation ) .

" Heath V. GosUn, SO Mo. 310, 314.

»« Liglifbourne i-. WaLsh, 89 N. Y. S. 856, 97 App. Div. 187. So
where I he plaintiff in fact knew at the time he performed services for the
association, that its members with whom he contracted intended not

280

Chap. V] LIABILITY OF MEMBERS [§ 64

are held individually liable only after the joint assets
are exhausted. ^^ Liability of a member once incurred
is not terminated by withdrawal from the association.^^
In two recent trade union cases it has been held that a
contract made by the association is binding on individ-
ual members on the theory that it was made by impli-

to become personally liable, but that he be paid out of the association's
funds, he cannot hold them individually. Attorney defending patent
suits. Burt V. Lathrop, 52 Mich. 106, 17 N. W. 716; McCabe v.
Goodfellow, 133 N. Y. 89, 95, 30 N. E. 728 (reversing 15 N. Y. S.
377) (attorney prosecuting for a "Law and Order" league); Jones
V. Hope, 3 T. L. R. 247, note (C. of App.) (solicitor for a volunteer
corps).

The rule apphes even when the defendant is the contracting member.

Plaintiff sued defendant for repairs on a steamer which defendant had
bought for the purpose of turning it over to an association being formed
of which plaintiff and defendant were to be members. Held: Defend-
ant was personally Hable for the contract unless by agreement the plain-
tiff was to look to the association for payment. It is immaterial for
whose benefit it was intended. Wells v. Turner, 16 Md. 133, 143.

A contract of a Baptist congregation with its minister construed to
be a contract payable only out of a fund to be raised by voluntary con- .
tributions. Evidence of the custom of Baptist chvu'ches known to the
plaintiff was properly admitted. Riffe v. Proctor, 99 Mo. App. 601, 609,
74 S. W. 409.

Individual members of an Odd Fellows Lodge are not liable to a
fellow member for sick benefits, for the constitution and by-laws show
that the payments are to be made by the lodge, not by its members.
Myers v. Jenkins, 63 Ohio St. 101, 116, 57 N. E. 1089.

Defendant signed note as trustee of a rehgious society for a loan
secured on specific property, the intention being that that property
alone should be Uable. Held: Defendant not personally hable, though
it was not a corporation. ElweU v. Tatmn, 6 Tex. Civ. App. 397,'401, 24
S.W. 71,25 S.W. 434.

By statute in Pennsylvania members are not hable individually, but
in an action against some in the name of the whole, they will be ordered
to see claim paid out of the treasury. Wolfe v. Limestone Council, 233
Pa. St. 357, 82 Atl. 499.

A member of a committee to organize a raih'oad was sued by a sur-
veyor employed by the committee with the approval of the defendant for
pay for his services. There was a verdict for the defendant. Held:
Properly left to the jury to decide whether under all the circumstances
the agi-eement was that credit be given to the defendant or only to a
fund to be raised. If the latter and the fund was raised, the agreement
became absolute and the defendant would be hable. Higgins v. Hop-
kins, 3 Ex. 162, 167. See Landman v. Entwhistle, 7 Ex. 632.

17 Patch Mfg. Co. V. Capeless, 79 Vt. 1, 63 Atl. 938.

18 Sizer v. Daniels, 66 Barb. 426, 433 (pohtical committee).

281

§ 64] NON-PROFIT ASSOCIATIONS [Chap. V

cation a term of the contract of employment of each in-
dividual member.^^ Members of an association are not
liable for the torts of a fellow member unless he had
general authority to represent them in the matter.^"

1^ The International Typothetae made a contract with the Inter-
national Pressman's Union covering relations of members, strikes, hours,
etc. Both unincorporated and representing local unincorporated asso-
ciations. Action by individual members of local of former against offi-
cers of Ohio Union. Minority of Union did not approve of this contro-
versy. Not all members of Union work for members of Tj-pothetae or
vice versa. Dictum, that contract though in form made bj^ two inter-
national bodies was reaUy a contract between each member of a local
of the TjTJothetae who had members of the Union in his employ and
those members, so that it became the terms of the separate contracts of
emplojTnent. AH members of TjT^othetae not indispensable parties.
But contract invalid for lack of authority or ratification by Union of acts
of its officers. Barnes v. Berry, 169 Fed. 225, 22S, 94 C. C. A. 501.

An agreement between a railroad and a union fLxing runs and rates
of pay to be in force two years is a usage and not a contract. As such it
becomes an imphed term of the contract of emplojTnent of a workman.
There was nothing in it about the period of service of emploj^ees, and so
that period would be indefinite and could be terminated bj^ either party
at any time. Hence discharged employee cannot recover for loss of
time after his discharge. Hudson v. V. N. O., etc. Ry., 152 Ky. 711, 718.

But see contra, Hudson v. Cincinnati Co., 152 Ky. 711, 154 S. W. 47.
A miners' imion not being a business enterprise cannot bind individual
members by agreement with operators respecting performance of work
and time and manner of pajonent. Bumetta v. Marceline Co., 180 Mo.
241, 79 S. W. 136.

Members of emplo jeers' association sue union for not suppljdng
union help according to a contract under seal between the two associa-
tions. Held: Doubtful if states cause of action and whether members
can sue. If agreement under seal, the members certainly could not
bring any action on it. Barzilay v. Loewenthal, 119 N. Y. S. 612, 134
App. Div. 502.

*" Hence defendant was Uable as surety on a bond for a Masonic lodge
that he signed in consequence of false representations of a member.
Sewall V. Breathitt Lodge, 150 Ky. 542, 545, 150 S. W. 677.

A declaration in libel against members of a merchants' association for
blackli.sting him as owing it $3.38 held not demurrable. No discussion
of i>rinciplcs of a.ssociation. White v. Parks, 93 Ga. 033, 20 S. E. 78.

Defendant joined a so-called protective association which sent series
of letters to debtors threatening to jjuljlish their names in a book to be
distributed to members. Envelope said it was association for collection
of bad debts. Defendant sent first letter in system and ])laintiff and
various local and central ag<'nts or officers then sent others of the series.
Held: Libfjlous and not ])rivil('ged. Real object of association w:is col-
lection by threats, not i)rotection. (No discussion of association's lia-
bility. Probably defendant would be liable on principle of agency.)

282

Chap. V] LIABILITY OF MEMBERS [§ 64

They have been held Hable for neghgence of an agent
whom they placed in charge of then- premises whether
they knew of his specific act or not.^^ Where an asso-
ciation knowingly took over property which had been
cleared of liens by credit given by the plaintiff and
others, the association was held to have taken it subject
to such claims. ^^

The nature of the obligation of an unincorporated
benefit society to its members when no certificate de-
fining the obligation or other written instrument is
issued was considered at length by Chief Justice Shaw
in an action to recover a funeral benefit of 130 brought
by the next of kin of a deceased member of an unincor-
porated lodge of Odd Fellows against certain of the
members of the lodge. The lodge was but a compo-
nent part of another aggregation of individuals called
the "Grand Lodge" to whom, by the same voluntary
agreement, the whole of the funds of the subordinate
lodge might at any time be forfeited. In his opinion he
said: Even if the lodge stood alone, "still the difficulty
presents itself of a suit for thirty dollars, upon the joint
promise of, say sixty persons, constituting a voluntary
association of individuals, perpetually changing by the
retirement of members and the admission of others.
Shall the same sixty individuals, who constituted the

Muetze v. Tuteur, 77 Wis. 236, 46 N. W. 123, 20 Am. St. Rep. 115, 9
L. R. A.86.

21 Plaintiff sues for suffering and death of husband by attack of a
bear escaped from gi'ounds of club of which defendants were members
where he was being kept as a prize. One defendant, president of the
club, did not know he was there. Held : The club was not properly in-
corporated and so is a voluntary association. The members of the club
employed agents in charge of the premises and were liable for his acts
whether they knew about them or not. Dissent as to the defendant who
did not know about it. Vredenburg v. Behan, 33 La. Ann. 627, 640, 645.

22 Hosman v. Kinneally, 90 N. Y. S. 357, 45 Misc. 411 (association
sued under statute).

283

§ 64] NON-PROFIT ASSOCIATIONS [Chap. V

lodge when the impUed promise took effect, be sued,
though they have ceased to be members? If not, how
can the residue be held upon a joint promise? Or shall
those be sued who were not members when the implied
promise took effect, but who have become such when
the action is brought? If so, what joint promise of
those who have since come in can be proved by the
evidence?

''But without encountering these difficulties, we think
there are two plain legal grounds upon which it may be
held that this action cannot be maintained.

''1. The constitution and bj-laws of the lodge, treat-
ing them as articles of a voluntary association, do not
amount to a promise to each member by all the rest, to
pay him an>i;liing. The stipulation in the by-laws is
that, on the death of each member, there shall be al-
lowed from the lodge a sum not less than thirt}^ dollars,
to defray the expense of burial, to be paid wdthout de-
lay to the deceased's nearest of kin. The payment is
for that purpose. It is, if any promise at all, a promise
by each member to contribute, by periodical and other
payments, towards a certain fund, for all the purposes
contemplated by the association, including money to
be paid promptly for the expenses of burial, to be done
usually before letters testamentary, in case of a will, or
letters of administration, in case of intestacy, can be
regularly issued. In other words, the promise of each
member is to pay money to the lodge; and the lodge,
not being incorporated, can maintain no suit. If it
creates any right which can be recognized by law, it is
an equitable right only to a share in a common fund,
raised either for purposes purely charitable, or for their
joint benefit, and can only be enforced in equity. And

284

Chap. V] LIABILITY OF MEMBERS [§ 65

if there were any ground for such equitable rehef , as in
case of partners in a joint fund, raised for a specific pur-
pose, of which we give no intimation, such equitable
relief could be sought only by a member or his legal
representative.

''2. But supposing this stipulation in the constitu-
tion and by-laws of the lodge, to amount to an express
promise to pay thirty dollars upon a certain contin-
gency, there is no consideration for such promise mov-
ing from the plaintiff to the defendants, or from any
person acting in privity with him or acting for his use
or benefit, or with an intent and purpose to obtain a
benefit to the plaintiff. There is no ground to infer,
from the facts agreed, that the son, who was a member
of the lodge, in paying his contributions thereto, had
any purpose of obtaining money from the lodge, in
case of his death, for the use of his father, or other next
of kin, for his own benefit ; to whomsoever it might be
paid, under these provisions, it was a naked trust, for
defraying the charges of his burial. It is, therefore,
not at all analogous to the case, where A owes B and B
owes C, and in consideration that B will release A, he
promises to pay C. Such promise is valid, and C may
sue A upon it. The reason is, that although the con-
sideration for A's promise to C does not move from C,
it moves from A for C's use and benefit." ^^

§ 65. Liability of Members of Associations of Employers
and of Employees

In considering the liability of non-profit associa-
tions and their members for torts, one naturally thinks
of the litigation that has growm out of modern combina-

23 Payne v. Snow, 12 Cush. 443, 445.
285

§ 65] NON-PROFIT ASSOCIATIONS [Chap. V

tions of employers and employees. A thorough con-
sideration of these cases, however, involves analysis of
the law of monopoly, competition and mifair trade
which is beyond the scope of this treatise. It is, more-
over, not strictly a part of the law of associations, for
although in almost every case an association either of
employers or of employees was involved, the princi-
ples of law upon which the case turned would have
been as applicable to an unorganized combination of
individuals as to an organized association. For these
reasons only an outline of the cases will be attempted.^
These cases arise where economic pressure is brought to
bear by a group for its own benefit against some other
group or individual members of that other group.
Obviously acts which when done by isolated individuals
are harmless, become seriously damaging when done in
concert by an association. ^

Prima facie any damage intentionally caused by one
man to another is tortious unless it is justified by the
occasion.^ So in the warfare of competition by combi-
nations, both as regards true competitors and as re-
gards the other necessary element of business enter-
prise, capital or labor as the case may be, the issue is
whether or not the courts recognize as a justification
for the damage caused by the combination the immedi-
ate purpose of the acts complained of.*

* For a detailed anah^sis of the cases, see "Crucial Issues in Labor
Litigation," by Jeremiah Smith, in 20 Harvard Law Review, 253, 345,
429, and "Competition and the Law," by Bruce Wyman, 17 Green Bag
210.

2 Pickett V. Walsh, 192 Mass. 572, 78 N. E. 753.
' Bowen, L. J., in Skinner v. Shew, (1893) 1 Ch. 413, 422; Hohnes, J.,
in Aikens v. Wiscon.sin, 195 U. S. 194, 204, 49 L. ed. 154, 25 S. Ct. 3.

* Mogul Co. V. McCregor, 23 Q. B. D. 598, G13. It used to be said
that an !i.s.so(;iation became lawful or unlawful a(;cording to the means
employed to attain its end. Comm. v. Hunt, 4 Met. 111.

It i.s of course true that illegal acts, euch as violence in the midst of a

286

Chap. V] LIABILITY OF MEMBERS [§ 65

The justification usually recognized for the damage
caused by pressure exerted by associations is a direct
competitive financial or business interest of the defend-
ant to be advanced by the act in question. Thus strikes
for increased wages or better working conditions are
legal. ^ But a strike to advance the private interests
of an individual is unlawful.*^ So a strike to force the
plaintiff to join the union by compelling the plaintiff's
employer to discharge him is illegal. '^ It has been held
that though the purpose of a labor union to raise wages
of its members is lawful, the purpose of a druggists'
association to raise prices by controlling and restrain-

legal strike, wiU render those responsible for it liable in damages and
will be enjoined. That, however, is a problem of the law of torts by in-
dividuals. The association is not a necessary element of it. The ques-
tions of the law of conspiracy come nearer to our subject. Thus it was
held that an organization for the propagation of theories involving the
present social system and division of property became an unlawful con-
spiracy if it advocated violent means or provided for driUing of troops
in violation of the mihtia law. Spies v. People, 122 lU. 1, 12 N. Yj.
865.

5 Iron Molders Union v. AUis-Chahners Co., 166 Fed. 45 (C. C. A.
— Wis.); Mitchell v. Hitchman Co., 214 Fed. 685 (C. C. A. — W. Va.);
Lohse V. Fuelle, 215 Mo. 421, 114 S. W. 997.

A combination of employers to meet a union demand for higher
wages is legal, since not to lower but maintain prices. Cote v. Murphy,
159 Pa. 420, 28 Atl. 190.

The power of the union cannot properly be used simply to make the
plaintiff pay a debt. Giblan v. National, etc. Union, (1903) 2 K. B.
600. See Webb v. Drake, 52 La. Ann. 290, 26 So. 791.

A strike to prevent the use of helpers by employees engaged in piece
work and thus diminishing the amount of work available for the strikers
in dull seasons is justifiable. Minasian v. Osborne, 210 Mass. 250, 255,
96 N. E. 1031. It does not violate the Sherman Act. Munroe v.
Colored Ass'n, 135 La. 893, 898, 66 So. 260.

^ A strike to force an employer to get rid of the plaintiff, a foreman,
instituted because of personal hostility of one Dacey and a desire to
advance his private interests was unlawful and plaintiff may recover
damages from the officers and members of the union though the dis-
charge was after a vote of all employees, union and non-union. The
plaintiff may recover all his damages arising from the discharge and
the inabihty to procure employment which may continue indefinitely.
Hanson v. Innes, 211 Mass. 305, 97 N. E. 756.

' Fairbanks v. McDonald, 219 Mass. 291, 106 N. E. 1000.

287

§ 65] NON-PROFIT ASSOCIATIONS [Chap. V

ing trade is unlawful.^ It is further generally held that
the conflict of financial interest must exist directly be-
tween those who exert the pressure and those upon whom
it is exerted, that is, that pressure through third par-
ties not personally concerned in the conflict, such as the
boycott, is illegal.^ Whether the strike to establish
the closed shop is legal is more difficult of solution and
the courts have differed on it.^" A strike by bricklayers

8 Rourke v. Elk Drug Co., 77 N. Y. S. 373, 75 App. Div. 145.

9 Pickett V. Walsh, 192 Mass. 572, 78 N. E. 753; Burnham v. Dowd,
217 Mass. 351, 104 N. E. 841; Branson v. I. W. W., 30 Nev. 270, 294,
95 Pac. 354.

Unions may refuse to work with non-union material. Bossert v.
United Brotherhood, 137 N. Y. S. 321, 77 Misc. 592. But a strike
against the use of goods of a single manufacturer though without per-
sonal hostihty is illegal. Bossert v. Dhuy, 151 N. Y. S. 877 (App. Div.).

Bill against officers of a national trade union for an injunction
against boycott of open shop goods of plaintiff. Held: There is no
right of action for this at common law. The Sherman Act confines
the remedy by injunction to the representatives of the government.
The New York statute makes the offense a misdemeanor but pre-
scribes no civil remedies. Hence an injunction may issue since there
is a combination to do an act made unlawful by statute and by unlaw-
ful means. A persistent campaign to unionize the plaintiff's shop has
been carried on and they have suffered in a different way from the
community at large. Irving v. Neal, 209 Fed. 471, 479 (D. C, —
N. Y.).

^° It was held illegal by the majority in Plant v. Woods, 176 Mass.
492, 57 N. E. 1011 (but with a striking dissent by Holmes, C. J.), and
in Berry v. Donovan, 188 Mass. 353, 74 N. E. 603; Erdman v. Mitchell,
207 Pa. St. 79, 56 Atl. 327; Lucke v. Clothing, etc. Assembly, 77 Md.
396, 26 Atl. 505.

Labor union. Closed shop strike. Bill by non-union employees.
Held: "What one individual may lawfully do, a combination of in-
dividuals have the same right to do provided they have no unlawful
purjjose in view" (p. 223). Courts are in conflict on subject, but
Illinois holds closed shop purpose lawful (p. 225). Unions believe it
essential to success of their organization. Kemp v. Division No. 241,
255 111. 213, 99 N. E. 389. See National Ass'n v. Cumming, 170 N. Y.
315, 63 N. E. 369.

A provision in by-laws for limitation of api)rentices is not an illegal
purpose. Snow v. Wheeler, 113 Mass. 179, 185.

Unit(!d Mine W(jrkers of America held to be unlawful organization
be(;auH(; of its ])Ui7)o.s<^ and pi'actices, viz.: to mono])olizc labor market,
b<'r;auH(! of a contract it had made with rival operators in another field
to unionize! West Virginia mines. Hitchman Coal Co. v. Mitchell, 202
Fed. 512 (D. C. — VV. Va.).

288

Chap. V] LIABILITY OF MEMBERS [§ 65

to control the "pointing" work on the building they
were working on was held legal, ^^ As in the boycott,
the pressure is exerted through a third party not di-
rectly concerned in the controversy between the two
groups of workmen. Here the third party is directly
concerned in dealing with both competitors, and in cases
arising out of competition between employers similar
pressure has been held justifiable. ^^ When the pres-
sure is exerted on third parties not directly concerned

11 Pickett V. Walsh, 192 Mass. 572, 589, 78 N. E. 753.

12 Mogul Co. V. McGregor, (1892) A. C. 25.

An association of retailers may agree not to patronize wholesalers
who sell to mail order houses and circulate a list of such. Montgomery
Ward & Co. v. South Dak. Ass'n, 150 Fed. 413 (C. C. — S. D.).

An association of fire undei-writers for regulation of premiums, pre-
vention of rebates, compensation of agents and non-intercourse with
companies not members was held not an illegal conspiracy. Conti-
nental Ins. Co. V. Board of Fire Underwriters, 67 Fed. 310.

An association of keepers of sailors' boarding houses designed to
control the business of shipping seamen is a legitimate commercial
device. Bowen v. Matheson, 96 Mass. 499.

An employer's blackhst was held legal. Bradley v. Pierson, 148
Pa. St. 502, 24 Atl. 65.

But a hverymen's association that prohibited members from doing
business with those who do not patronize members exclusively was
held an illegal monopoly. Gatzow v. Buening, 106 Wis. 1, 81 S. W.
1003.

A granite manufacturing association had a by-law imposing, in
effect, a fine on members dealing with outsiders. Held: Though the
object was not illegal, viz., competition, yet coercion by fines is illegal
and the defendant is hable in damages. MarteU v. White, 185 Mass.
255, 67 N. E. 1085. See BoutweU v. Marr, 71 Vt. 1, 42 Atl. 607.

An agreement between employers and unions restricting competi-
tion but primarily for their own benefit and not aimed at the plaintiff
is not illegal conspiracy. National Fireproofing Co. v. Mason's Ass'n,
169 Fed. 259 (C. C. A. — N. Y.). Contra, Curran v. Galen, 22 N. Y. S.
826, 2 Misc. 553.

One five stock exchange adopted rules forbidding members to trade
with non-members. Members of a rival exchange sued members of
first exchange, alleging conspiracy to boycott and monopohze. Held:
Mere adoption of rules does not constitute a cause of action for plaintiff.
No causal connection estabhshed. The rule applies only to the members
and can only remotely affect outsiders. Imphes that if members in
fact refused to trade and carried out the rule it might be different.
Downes v. Bennett, 63 Kan. 653, 661, 66 Pac. 623, 88 A. S. R. 256, 55
L. R. A. 560.

289

§ 65] XOX-PROFIT ASSOCL\TIOXS [Chap. V

in dealing with both competitors the pressure exerted
is generally held illegal. ^^

In most of these cases the litigation is between the
individual damaged and members of the association as
representatives of the whole and an injunction is
sought against all members of the association.^^ In
some cases individual members of the association are
sued to recover damages suffered from the acts com-
plained of.^^ It is often exceedingh' difficult to pro-

1^ Loewe i'. California, etc. Federation, 139 Fed. 71; Beck v. Railway
Teamsters, 118 Mich. 497, 77 X. W. 13; Barr v. Essex Trades Council,
.53 X. J. Eq. 101, 30 Atl. 881.

By-laws of an association to prevent wholesalers seUing to outsiders
pro\'ided for a claim by members against such wholesalers and re-
quired members to boycott. Held: A dealer could enjoin a member
from making such claim. Jackson v. Stanfield, 137 Ind. 592, 36 X. E.
345.

But a wholesaler was held to have no action against the secretary
for threatening to send a notice of boj'cott. Bohn Mfg. Co. v. HoUis,
54 Minn. 223, 55 X. W. 1119.

Boycott illegal though the ultimate object was to benefit a union
emploved bv the manufacturer bovcotted. Am. Fed. of Labor v.
Buck's Stove Co., 33 App. D. C. 83. '

Bricklaj-ers may not strike because emplo5'er employ's on another
job non-vmion pointers. Pickett v. Walsh, 192 Mass. 572, 587, 78 N. E.
753.

" L. D. Willcut & Son Co. v. Bricklaj-ers' Union, 200 Mass. 110,
85 N. E. 897; Thomas Russell & Sons v. Stampers', etc. Union, 107
N. Y. S. 303. Injunction wiU not be granted on e^^dence merely of
misconduct of individuals. Authorization must be proved. J. T.
Parkinson Co. v. Building Trades Council, 154 Cal. 581, 98 Pac. 1027;
Aluminum Co. r. Local Xo. 84, 197 Fed. 221.

1* A demurrer to a complaint under the Sherman Act against mem-
bers of a union for conspiracy to boycott was overruled (Danbvuy
Hatters' case). Loewe v. Lawlor, 208 U. S. 274, 52 L. ed. 488, 28 S.
Ct. 301; Lawlor v. Loewe, 235 U. S. 522, 535; Hanson v. Innes, 211
Mass. 301, .305, 97 X. E. 756.

Tort for conspiracy. Defendants were granite manufacturers and
members of a local association of employers affihated with a Xew Eng-
land association. This association passed resolution that members
should trade only with members. By-laws imposed fine for vioLition
of any rules. They had tritxl to get plaintiff to join and admitted they
pa.'vsed vote to make plaintiff join. Plaintiff's business destroyed.
Held: Defendants liable. The penalty made the rule intimidation of
minority by majority. Illegal means made it actionable conspiracy.
"When the will of the majority of an organized body in matters involv-

290

Chap. V] LIABILITY OF MEMBERS [§ 65

duce evidence of authorization or ratification by the
defendants of the acts complained of.^*^

ing the rights of outside parties is enforced upon its members by means
of fines and penalties the situation is essentially the same as when unity
of action is secured among unorganized individuals by threats or intimi-
dation" (p. 8). "The voluntary acceptance of by-laws providing for
the imposition of coercive fines does not make them legal and collectible
and the standing threat of their imposition may properly be classed
with the ordinary threat of suits upon groundless claims. The fact that
the relations and processes deemed essential to a recovery are brought
within the membership and proceedings of an organized body, cannot
change the result. The law sees in the membership of an association of
this character both the authors of its coercive system and the victims
of its unlawful pressure. If this were not so, men could deprive their
fellows of estabUshed rights simply by working through an association"
(p. 9). "It is clear that the law cannot concede to organizations of
this character the powers and immunities claimed for theii- association
by these defendants and retain its own power to protect the individual
citizen in the free enjoyment of his capital or labor" (p. 10). Boutwell
V. Marr, 71 Vt. 1, 42 Atl. 607, 76 Am. St. Rep. 746, 43 L. R. A. 803.

Tort for conspiracy brought against members of labor union for de-
priving plaintiff of hearse at funeral. Held: Illegal combination in
restraint of trade. Does not matter what expressed purposes of organ-
ization are if this act of theirs was unlawful. If the combination is un-
lawful, it is none the less so because it is in the form of an association.
Gatzow V. Buening, 106 Wis. 1, 14, 81 N. W. 1003, 80 Am. St. Rep. 17,
49 L. R. A. 475.

Action of conspiracy against labor union for strike to enforce closed
shop held maintainable and damages collectible from members "so im-
phcated as to be responsible for what they helped to set in motion or
helped on." Roofing Co. v. Jose, 12 Ont. L. R. 200.

1^ Should have submitted to jury whether evidence proved individual
defendants authorized acts of agents of union. Mere payment of dues
even after suit started was incompetent evidence. Fact that union had
clause in constitution that officers shall use all means in power to union-
ize shops is not enough to prove assent of members to illegal means unless
it appears that with the knowledge of the members unlawful means had
been so frequently used with the express or tacit approval of the associa-
tion that its agents were warranted in assuming that they might use
such means in the future and that members would tolerate it. Lawlor
V. Loewe, 187 Fed. 522, 526 (C. C. A. — Conn.). See Hill v. Eagle Co.,
219 Fed. 717 (C. C. A. — W. Va.).

In the final appeal of the Danbury Hatters' case for damages under
the Sherman Act for boycott, the court said: "The court in substance
instructed the jury that if these members paid their dues and continued
to delegate authority to their officers unlawfully to interfere with the
plaintiff's interstate commerce in such circumstances that they knew or
ought to have known and such officers were warranted in the behef that
they were acting in the matter within their delegated authority, then
such members were jointly hable and no others. It seems to us that

291

§ 65] NON-PROFIT ASSOCIATIONS [Chap. V

An action was brought by contractors against a trade
union which controlled the local labor market in its
trade. The union had notified him of its wage scale and
he paid it to his employees. The union lowered its
scale without notice to him and he continued to pay
the old scale. He sought to recover the difference in
wages from the union, joining some members to repre-
sent all. Ademurrer was overruled. The court said that
though he had no contract with the union, the relation
established by its monopoly was the same as contract.
Further he was entitled to rely on its representations.
The failure to notify of the change made the old notice
a continuing misrepresentation.^''

this instruction sufficiently guarded the defendants' rights and that the
defendants got all that they were entitled to ask in not being held charge-
able with knowledge as matter of law. It is a tax on credulity to ask
any one to believe that members of labor unions at that time did not
know that the primary and secondary boycott and the use of the ' We
don't patronize' or 'Unfau-' hst were means expected to be employed
in the effort to unionize shops." Lawlor v. Loewe, 235 U. S. 522,
535.

If an agreement not to work on non-union trim enforceable by fine
is unlawful, defendants are hable for anything done to carry it out even
if they did not participate, for the agreement is part of the organic law
of the association. Irving v. Neal, 209 Fed. 471, 476 (D. C. — N. Y.).

Prosecution of founder of a so-called labor union alleged to be a trea-
sonable conspiracy. Held: Evidence of acts of defendant while he was
president did not prove that he acted under instructions from the asso-
ciation or that the association was formed for the purpose of committing
those acts. The fact that the founder of an association may have had
an illegal purpose in view does not make association illegal under the
penal code. U. S. v. Gomez, 8 Philippine 630, 651.

Cannot enjoin for acts of delegates as individuals where union and
members took no part in the strike. Pickett v. Walsh, 192 Mass. 572,
589, 78 N. E. 753.

Ratification of violence by a trade union may be proved by circum-
stant ial evidence but an allegation of con.spiracy rcqub'es direct proof.
Thoma,s Rus.s(!ll & Son v. Stampers' Union, 107 N. Y. S. 303.

Wh(;re labor lodges maintained strikes of members by money contri-
l)Ul ions to KUi)j)ort strikers and ])ick(!ters and the use of abusive epithets
was oj)en and nolorioiis during tlu^ strike t hey are liable as having aided
and abetted hik^Ii iiii.sconduct. Jones v. Maher, 116 N. Y. S. 180, aff'd
125 N. Y. S. 112(i, 141 Ai)p. Div. 919.

" Powers V. Journcym(!n, 172 S. W. 284 (Tenn.).

2!)2

Chap. V] RIGHTS OF CREDITORS [§ 66

Plaintiff had a contract for musicians with a union.
He did not Uke the ones they furnished and desired to
employ other members of the union who were willing
to work but feared fines and expulsion if they did so.
The court refused an injunction. He voluntarily
made a contract and must abide by the union rules. ^^

§ 66. Rights of Creditors to Reach the Funds of the
Association

It is a different question whether the funds of the
association are liable for the contracts and torts of the
association, and if so, how they can be reached. It is
generally held that for contracts of the association its
funds can be reached in a representative proceeding in
equity,^ and only in such proceedings.^ When the con-
tract was made by trustees of the funds of the associa-

18 Rhodes Bros. Co. v. Musicians' Union, 92 St. 641 (R. I.).

1 Van Houten v. Pine, 36 N. J. Eq. 133, 137 (benefit society).
Pastor of a Catholic church borrowed money of plaintiff and others

upon written contracts of repayment in the fonn of deposit books in
the name of the church. The money was mingled with the general '
church revenues and used to pay its expenses and debts and to ac-
quire property. In an action against the bishop on these contracts the
court said : " It cannot be assumed that the plaintiff could not have given
credit to the fund. The fund would have been the ultimate resort for
payment had the church been incorporated under the statute or had
the deposits been in an incoiporated savings bank, and it is not neces-
sary that there should have been any personal habiUty on the contract
in order that there should be a remedy against the fund." Leahy v. Wil-
liams, 141 Mass. 345, 357, 6 N. E. 78.

Held : That a social club though without constitution or by-laws and
without pm-pose of pecuniary profit or advantage ought to be liable
under the New York statute as a joint stock association. In an action
against the president as such for a purchase made by him while acting as
a committee of the club, the question should have been submitted to
the jury whether credit was given to the club or not. (Disapproving
Park V. Spaulding, 10 Hun 128). Ebbinghousen v. Worth Club, 4 Abb.
N. C. (N. Y.) 300.

2 Moore v. Stemmons, 119 Mo. App. 162, 166, 95 S. W. 313 (trus-
tees of church); Fletcher v. Tribe, 9 Pa. Sup. Ct. 393, 397 (benefit soci-
ety); see Maisch v. O. A., 223 Pa. St. 199, 200, 72 Atl. 528.

293

§ 66] XOX-PROFIT ASSOCL\TIOXS [Chap. V

tion in their capacity as trustees, upon well-established
principles of the law of trusts, the plaintiff can reach and
apply in pajTaent of his debt the trust fund b}' proper
proceedings in equity.^ In one case it was held that
the fund could be reached without the aid of a bill in
equit3\^ Apparently the same result has been attained

' Bill in equitj' on promissory- note signed by two of three trustees
of the society of Shakers. Held: "The society was not a partnership.
Neither was it a corporation, in the proper sense of that term. The
members have no property, haA-ing renounced all to the societ}-. It is
a somewhat anomalous case, but is yet of a kind that occasionall}' ap>-
pears in the books of reports and in regard to which the law has been
settled bj- a nimaber of decisions." Suit against individual members
would be good only against those sui juris and not dead. Members
have no private property for satisfaction of a judgment (p. 737). "The
note was not eflfectual against anj-thing but this changing bod}', and
that only bj' supposing it to be intended to be a charge against the prop-
erty which aU the members of the society had concurred in putting in a
common name in the hands of the trustees of the society" (p. 738).
Hence created equitable Men, so it is not a mere legal Uabihty on which
the action is brought. Though signed by individuals described as tnis-
tees of the society, evidence is admissible to show it is the obhgation of
the principal and not the agent (p. 740). Shaker Soc. v. Watson, 68
Fed. 730, 37 U. S. App. 141, 15 C. C. A. 632.

A debt of a church may be satisfied out of property- held in trust for
it by trustees who are made defendants. The debt here was evidenced
by a note of the trustees authorized by a resolution of the chiu"ch. It
appears to have been a bill in equity. Lyons v. Planters, 86 Ga. 485, 490,
12 S. E. 882. (Quer^- if incorporated.)

A bill in equitj' may be brought by a creditor of a church against its
trustees to subject its propertv to pa\Tnent of his debt. Linn v. Carson,
32 Gratt. 170, 183 (Ysl.).

Trustees of an \mincorporated Methodist church had authority to
mortgage the church property to reimburse themselves for advances.
The trustees gave their personal notes to the plaintiff for money loaned.
He brought a bill in equity to subject the church property to paj-ment
of his debt. Held : When a trustee has power to sell or mortgage, equity
will enforce a sale or mortgage to secure a debt contracted within his
authority (p. 668). The notes here were recognized for a time as bind-
ing by being printed in the list of the debt of the church. The fact that
the trustees did not add the designation of their oflBce did not affect
their rights as against the church (p. 669). The trustees arc the only
neccssar>' parties defendant. It is practically impossible to bring in all
the beneficiaries (p. 670). It is immaterial that plaintiff is one of the
trustees. Bushong v. Taylor, 82 Mo. 660.

* In an action of contract against the trustees of a "Family of
Shakers," a judgment against them and their successors in oflBce
would be valid, and would be satisfied out of the funds of the

294

Chap. V] RIGHTS OF CREDITORS [§ 66

by statute.^ Mechanics' liens on the property of the
association have been enforced under contracts made
by a trustee.^ It is not yet clear if the property of the
association is liable for the torts of its members/ but
on the usual principles of agency it should be liable for
torts of its officers in the course of acts within the scope

society without the aid of a bill in equity. Davis v. Bradford, 58
N. H. 476, 4S0.

* Under Georgia code a proceeding may be brought to subject to a
debt of an unincorporated church property held for it by trustees. The
trustees are the only necessary parties. A pastor may so sue for pay-
ment of his salary and for the value of rent of a parsonage he claimed
the right to occupy as part of the contract for his services. Kelsey v.
Jackson, 123 Ga. 113, 114, 50 S. E, 951. Ace. on first point. Josey v.
Union Loan & Trust Co., 106 Ga. 608, 32 S. E. 628.

Where an unincorporated church used for two years a piano bought
for it by the pastor, it shows ratification of the purchase and an action
may be brought to subject the property held by its trustees for the debt.
Smith V. Goode, etc. Co., 68 S. E. 620 (Ga.); Bastrop v. Austin Rice
Growers' Ass'n v. Cochran, 171 S. W. 294 (Tex.) (must first exhaust
assets of association).

^ Members joining a church authorize its trustee to act to the ex-
tent of his beneficial interest in the property of the association and any
debt contracted by the trustees on account of the premises will be the
debt of the members to the extent of the interest held by the trustees,
and a mechanic's hen on the property can be enforced. Harrisburg Co.
V. Washburn, 29 Ore. 150, 162, 44 Pac. 390.

A lien cannot be enforced against the property of a church in an ac-
tion against individuals alleged to be trustees without evidence of their
authority to bind the church. Owens v. Caraway, 110 S. W. 474 (Tex.).

Notice of a lien given to a CathoUc bishop who holds as trustee for
an unincoi-porated congregation is not a notice to the real owner be-
cause under the statute of Pennsylvania he holds only as passive trus-
tee. Carrick v. Conevin, 243 Pa. 283, 90 Atl. 147.

A majority of a church congregation including its trustees voted to
make repairs on the church, expecting to raise the money by voluntary
contributions. The plaintiff did the work under contract with a com-
mittee appointed by the church for that purpose. Held: He may en-
force a mechanic's hen against the church building, naming the trustees
as defendants. Gortemiller v. Rosengarn, 103 Ind. 414, 418, 2 N. E.
829.

7 Elkington v. London Ass'n, (1911) 28 T. L. R. 117 (tort for libel
but words held not libellous); Brown v. Lewis, 12 T. L. R. 455 (tort
against committee of football club for negligence in erecting a stand) ;
Council w. United Hatters, 74 Atl. 188 (N. J.) (tort against labor union
for consequences of a strike) ; Ruddy v. United Ass'n, 76 N. J. L. 467,
75 Atl. 742 (tort against labor union for maUcious interference with
contract) .

295

§ 67] NON-PROFIT ASSOCIATIONS [Chap. V

of their authority. Attempts to exempt by legisla-
tion trade unions and associations of employers from
liability for torts of their members committed on behalf
of the association will doubtless be held unconstitu-
tional as class legislation.^

English trade unions occupy a somewhat different
position from those in the United States. At common
law in England they were held illegal as combinations
in restraint of trade. By statute unions that register
under the statute have been legalized for some pur-
poses and have received certain rights similar 4,0 those
conferred on corporations. In the Taff Vale case it was
held that having received by statute corporate privi-
leges a union became subject also to like responsibilities
and could be enjoined in its association name for the
torts of its agents and the funds of the union were held
liable for the damage caused.^ Before the Trade Dis-
putes Act of 1906 the funds of an English trade union
could be reached by a plaintiff damaged by a libel pub-
lished by the union. ^° If the funds were vested in trus-
tees they might be joined as defendants. ^^ Now this
can be done only if the act was not in contemplation or
furtherance of a trade dispute. ^^

§ 67. Powers of Officers

Officers of non-profit associations have not the im-
plied authority which officers of business associations
would have.^ They clearly have no power to transfer

8 Opinion of the Justices, 211 Mass. 618, 98 N. E. 337.
0 TufT Vale Ry. Co. v. Amalgamated Soc, (1901) A. C. 426.
i« Linakcr v. Piloher, 70 L. J. K. B. 396.

" South Wal(!S I-\«(loration v. Glamorgan Co., (1905) A. C. 239.
'2 Ric^lianls v. Bartram, 25 Timo.s L. li. 181.

• A treasurer of an unineoi7)orated association (Japanese Farmers'
Association) has no imijlied pow(!r to endorse for suit notes given to the

290

Chap. V] POWERS OF OFFICERS [§ 67

all the property of the association to another organiza-
tion. ^ Where they advance money to buy for the as-
sociation property which they were authorized to buy
they have a lien upon it for their reimbursement.^
They are subject to the usual fiduciary obligations.^
But a treasurer, sued for funds which he got together to
distribute under a void vote, cannot set off expenses
incurred in preparing to carry out the vote or in de-
association as penalty for breach of contract. Nakegawa v. Okamoto,
164 Cal. 718, 723, 130 Pac. 707.

The fact that one R was trustee for a lodge was not of itseK sufficient
from which to infer that he had authority to make a contract for the
sale of property belonging to the lodge. (This was action for commis-
sions.) Castner v. Rinne, 31 Col. 256, 72 Pac. 1052.

An assignment properly drawn and executed by the president of a
corporation and having its seal is presumptively authorized, but not if
it is an unincorporated association. Not a partnership and must prove
authority of agent from individual members. Brower v. Crimmins, 121
N. Y. S. 648, 67 Misc. 68.

Although the deacons of an unincorporated church were by statute
given limited corporate powers to take property in succession, they have
no power to issue notes binding their successors or the church or to make
executory contracts. Jefts v. York, 10 Cush. 392, 394.

2 Rudolph V. Southern Beneficial League, 7 N. Y. S. 135, 739, 23 Abb.
N. Cas. (N. Y.) 199 (incorporation of benefit society by executive
board) .

Property of an unincorporated association is not transferred to a
corporation organized by its officers to succeed it without a vote of the
association. Koprucki v. Wojenechowski, 130 N. Y. S. 736, 73 Misc.
46.

Trustees for a church held under a deed forbidding them to sell with-
out "the concurrence of two-thirds of the membership of the church
for the time being." A mortgage of the church was given to one who
paid off its debts and nine years later was foreclosed. The authority to
mortgage was disputed by heirs of a surviv ng trustee. The congre-
gation had dispersed. There was no evidence that the mortgage was
authorized at a church meeting, but all witnesses admitted they knew of
it at the time. Held: It was ratified by their acquiescence. The law
presumes that eveiy one performs his duties. After a long lapse of time
such presumptions may be indulged to supply deficiencies in a title.
McCalhster v. Ross, 155 Mo. 87, 94, 55 S. W. 1027. Ace. Rountree v.
Blount, 129 N. C. 25, 39 S. E. 505.

3 Minnett v. Lord Talbot, 1 L. R. Ire. 143.

^ A lodge may recover money of lodge used by officer to pay per-
sonal debt when defendant was charged with notice by signature of
check as "Grand Treas." Washbon v. Hixon, 87 Kaii. 310, 124 Pac.
366.

297

§ 68] NON-PROFIT ASSOCIATIONS [Chap. V

fending a suit to enjoin distribution.-^ The usual rules
regarding tenure of office ^ and duties ^ apply. A
Society of Shakers was held estopped to deny the
authority of two out of three trustees to bind it in
contract because that had long been its custom.^

§ 68. Liability of OfiScers and Agents

Liability in these cases depends on principles of
agency. Hence the rule that when the principal for
whom an agent pui'ports to act is not liable, the agent
may be held personally, has been applied to acts by
officers and committees of these associations without
express authorization by the members.^ In some cases
liability is put on the ground that the association, the
supposed principal, could not be liable as such, though
the members individually might.- In most cases, how-

5 St. Mary's Benev. Ass'n v. LMich, 64 N. H. 213, 9 Atl.
98.

® By-law providing for election of physician to hold office "during
pleasure of association" authorizes dismissal at any regular meeting in
absence of by-law to contrary-. Brandon v. Worlev, 28 X. Y. S. 557, 8
Misc. (N. Y.) 253, 59 X. Y. St. 237.

^ Sureties on a bond given by a treasurer of a lodge, an unincorpo-
rated association, are not discharged by changes in membership after
execution or an increase involving gi'eater responsibihty. AU this must
have been contemplated when the bond was given. Coombs v. Har-
ford, 99 Me. 426, 429, 59 Atl. 529.

8 Shaker Soc. v. Watson, 68 Fed. 730, 741 (C. C. A.).

1 Caldicott V. Griffiths, 8 Exch. 898, 903, 23 L. J. Exch. 54 (trade
association to get information about legislation); Osborne v. Dickey,
71 S. E. 763 (Ga.) (committee contracting for banquet); Lewis v.
Tihon, 64 la. 220, 19 X. W. 911 (landlord suing a club); Comfort v.
Graham, 87 la. 295, 298, 54 X. \V. 242 (ditto); Riffe v. Proctor, 99 Mo.
App. 601, 608, 74 S. W. 409 (church); Bartholomae v. Kauffman, 47
N. Y. Super. Ct. 552, aff'd 91 N. Y. 654 (agent purporting to sign for
tru8to(\s of an association when there were no trustees); McCartee v.
Chambers, 6 Wend. 649 (committee appointed by a pubUc meeting);
Lincoln v. Cranflail, 21 Wend. 101 (committee preceding a corporation);
Frcflcnhall v. Taylor, 23 Wis. 538, 540, aff'd 26 Wis. 286, 291 (committee
of an a.s,sociation).

* Xationul society not liable for services of a State organizer em-

298

Chap. V] LIABILITY OF OFFICERS AND AGENTS [§ 68

ever, liability could be established on the ground that the
contracting party was a member as well as an agent of
the association.^ If he contracts as an individual, he
is personally liable unless he expressly limits his liabil-
ity.'* In a few cases the coiu^t appears to have held the
member contracting not personally liable because he
acted as agent. ^ It is probable that these cases could

ployed by unincorporated State society. Crawley v. Am. Soc. of Equity,
153 Wis. 13, 18, 139 N. W. 734.

^ CuUen V. Queensbury, 1 Bro. Ch. 101 (committee of club); Rob-
inson V. Robinson, 10 Me. 240, 243 (agent of meeting that subscribed
to building for an academy); Chick v. Trevatt, 20 Me. 462, 464 (trus-
tees of society for building a parsonage. Notes of trustees); Mc-
Grearcy v. Chandler, 58 Me. 537 (note of directors) ; Band v. Infantry,
134 Mich. 598, 601, 96 N. W. 934; Evans v. Lilly, 95 Miss. 58, 61, 48
So. 612; McWilliams v. Willis, 1 Wash. 199, 202 (Va.) (lease of race
track); McKinnie v. Postles, 4 Perm. (Del.) 16, 54 Atl. 798 (committee
secm-ing quarters at a convention).

Members of a building committee of an unincorporated Catholic
church were held personally liable for materials furnished although the
plaintiff charged them on his books to the church and knew that it was
intended to raise the money by voluntary contributions. These two
facts are not enough to imply a contract to be paid only out of the fund
to be raised. The committee are Hable either as members of the associa-
tion authorizing the work or as agents of a principal who is non-exist-
ent. The fact that others equally Uable have not been joined is no de-
fense on appeal. It should have been pleaded in abatement. Clark
V. O.'Rourke, 111 Mich. 108, 113, 69 N. W. 147.

Those contracting in the name of an unincorporated association are
themselves liable either as themselves principals or as purporting to act
for a non-existent principal. Blakeley v. Bennecke, 59 Mo. 193.

* A member of a building committee of a church may be personally
liable for goods forwarded on his order if he did not expressly limit his
liabiUty. Cruse v. Jones, 71 Tenn. 66.

The trustees of an unincoiporated church signed a note as individuals
for its debt. Held : They are personally Uable on the note. To escape ha-
biUty on the ground that they were merely agents they must show a prin-
cipal who is legally Uable. Phoenix Ins. Co. v. Burkett, 72 Mo. App. 1, 3.

^ A majority of the building committee of a church signed a contract
for the work in their individual names, adding "a committee for build-
ing," etc. Held: They were not personally Uable on the contract. The
intent to contract as agents was plain and though acting only by a ma-
jority, it was ratified later by the votes of the society. Hewitt v. Wheeler,
22 Conn. 557, 563.

Plaintiff made a written offer to build a chvu-ch for a price named.
It was accepted by the defendants individually. He sued them for the
price. Evidence showed they had acted only as a committee of the

299

§ 68] NON-PROFIT ASSOCIATIONS [Chap. V

be distinguished on a more careful statement of
facts.

Cases have arisen where the plaintiff sought to impose
liability because the defendant was a member of a com-
mittee of an association which committee had con-
tracted with the plaintiff. The same principles apply
to these small groups. A member of the conunittee
is not liable in the absence of evidence of author-
ization or ratification.^ Ratification may be found
from evidence of knowledge.'^ Ratification cannot

chiirch. Held: Not individually liable. Johnson v. Welch, 42 W. Va.
18, 24 S. E. 585.

The head of an unincorporated Catholic sisterhood was sued by a
priest for return of a contribution he made to its building fund on con-
dition that if they ceased to use if for the purpose of a convent then it
was to be returned to him. Held: She was not individually Uable be-
cause she acted as agent only in receiving it. Emonds v. Termehr, 60
la. 92, 94, 14 N. W. 197.

A member of the building committee of an association formed to
build a church who contracts as such with a fellow member for such serv-
ices, is not personally hable, for the plaintiff knows that he acted only
as agent for that society. Abbott v. Cobb, 17 Vt. 593.

8 Kutemen v. Lacy, 144 S. W. 184 (Tex. App.) (building committee
of a lodge); Todd v. Emly, 10 L. J. Exch. 161, 262, 7 M. & W. 427, 8
M. & W. 505, 509 (managing committee of a club. Action for wine sold
the house steward); Cross v. WilMams, 7 H. & N. 675, 681, 31 L. J.
Exch. 145, 6 L. T. Rep. N. S. 675 (committee in charge of military corps).

Members of a building committee of a church were held not person-
ally hable on their contracts as such. "They were appointed by the
body of the subscribers to execute a mere trust." Cheney v. Clark, 3
Vt. 431, 435.

^ The officers of a dispensary were also the managing committee.
Held : Liable for drugs supphed through dispensary on orders of other
officers on behalf of the committee to their knowledge. This was the
regular cour.se of dealing. Prima facie this makes them hable unless the
plaintiffs agreed to look only to the fund for payment. Luckombe v.
Ash ton, 2 Fost. & Fin. 705.

A club in (hhi authorized its committee of management to borrow
monf'y. Defcnrlant and plaintiff were members of committee. De-
fendant evidcndy knew it was being done though he did not attend all
the meetings at whi(!h it was disirussed, including the meeting at which
the Hpcf:ific loan was iirrangcd. Plaintiff had to pay the loan and now
Hues for contributions. Held: Lialile. Defendant knew and approved
what W!iH })eing done. Mount cashel v. Barl)er, 14 C. B. 53, 68.

Subscribers to (establish a hospital elected a committee to manage it.

300

Chap. Vj DISSOLUTION [§ 69

be found of a contract that did not purport to bind
the defendant.^

§ 69. Dissolution

A vote of a majority of an association to dissolve and
distribute the assets of the association among its mem-
bers is void unless adopted in accordance with the pro-
visions of the by-laws or rules of the association.^ The

Defendant was a member of the committee and frequently attended
meetings and was at a meeting when steward presented a balance sheet
showing plaintiff's claim. Held: Defendant personally Uable. Burle
V. Smith, 7 Bing. 705.

A "provisional committee" preparing to form a corporation is liable
for debts incurred by its secretary only if authorized on the principles
of principal and agent. Mere membership is not conclusive, but is com-
petent evidence of authorization. If he knew of the weekly meetings of
the committee and saw its secretary doing work which involved buying
stationery, that was evidence of authorization of its purchase, though
he never specifically authorized pledging his individual credit or thought
of liability at all. Bailey v. Macauley, 19 L. J. (Q. B.) 73, 81.

A member of a provisional committee to organize a railroad was
held personally Uable for a bill for stationery. He knew it was being
used and that the committee had no funds. Barnett v. Lambert, 15
M. & W. 489, 492.

Charge to jury that managers of club were Mable for meats ordered
by servants of the club even if they had no personal knowledge. Steele
V. Gourley, 3 T. L. R. 118.

But merely joining other members of a committee in appointing
a sub-committee according to the rules of a club did not constitute an
authorization of expenditures so ^s to make defendant personally
liable, though the rules said that all authority of the general committee
was vested in the sub-committee. Draper v. Manvers, 9 T. L. R.
73.

* Action cannot be brought against seven trustees of a church on a
contract signed by three of them as individuals even on an allegation
that they were appointed a conxmittee of the trustees to sign the con-
tract without reformation of it. They cannot ratify what does not
purport to bind them. Ashley v. Henderson, 166 Ind. 147. 76 N. E.
985.

1 St. Mary's Benev. Ass'n v. Lynch, 64 N. H. 213, 9 Atl. 98 (benefit
society. No notice of meeting. By-laws forbade dissolution if ten
objected); Kuhl v. Meyer, 42 Mo. App. 474 (benefit society. But
though the vote at the meeting improperly called did not dissolve it,
the jury might find it dissolved de facto by failure to collect dues in
accordance with another provision of the by-laws for lapse of member-
ship by non-payment of dues) ; Torrey v. Baker, 1 Allen 120, 122 (fire

301

§ 69] NON-PROFIT ASSOCIATIONS [Chap. V

assent of every member is required to effect a merger
of an association in a corporation.^ A petition for disso-
lution of an association on the ground that dissensions
made it impracticable was denied.^ Arbitrary dismissal
of a member was not sufficient ground for a petition by
him for distribution of its funds. ^ But where the asso-
ciation had insurance features, the rules applicable to
petitions for dissolution of partnerships were applied.^

company. Rules required two-thirds vote) ; Fischer v. Raab, 57 How.
Pr. 87, 94 (N. Y.) (benefit society. Constitution provided that there
should not be dissolution if five voted to continue).

With the consent of aU members a mutual burial society could dis-
solve and distribute assets among membere. Stemmerman v. Lilien-
thal, 54 S. C. 440, 448, 32 S. E. 535.

In the case of a farmers' telephone line it was held that the members
could divide some of its property in severalty and sell the remainder
at auction and then reorganize and cut off one of their former mem-
bers. Primm v. Wliite, 162 ]Mo. App. 594, 142 S. W. 802.

2 Mason v. Finch, 28 Mich. 282.

3 Lafond v. Deems, 81 N. Y. 507, 514 (see 52 How. Pr. 41, 48)
(benevolent society); Thomas v. Ellmaker, 1 Pars. Eq. Cas. 98, 111
(Pa.) (fii-e company).

4 Burke v. Roper, 79 Ala. 138, 144. See Burke v. Roper, 83 Ala.
193, 3 So. 439 (rehgious society).

^ Plaintiffs, members of labor union, filed bill for dissolution on
ground that they had been excluded from meetings unless they would
take an oath not provided for in the constitution or by-laws. The
association provided for sick benefits. On demurrer. Held: The asso-
ciation is a partnership and not a charity. "It partakes of the nature
of a partnership" (p. 635). Exclusion of partners from participation
in business is gi'ound for dissolution. Demurrer overruled (p. 538).
Gorman v. RusscU, 14 Cal. 531. Having reinstated the members and
abolished the oath it was riglit that the decree of dissolution be refused.
Gorman v. Russell, 18 Cal. 688; P'ischer v. Raab, 57 How. Pr. 87, 94
(N. Y.).

Members of a benevolent society filed a bill to restrain the trustees
of the society from dissolving it and distributing its assets. It was
stipulated in the articles that it should never be dissolved so long as
seven members would support it. Nature of society not clear but
seems to have be(!n some sort of mutual insurance scheme. Held:
Nature of the organization such that its agi'cement (;annot be spe-
cifically enforced. The only relief is to order a dissohition and distribu-
tion of jiHst^ts. Court describes it as a partnershij). Beavunont v. Mere-
dith, 3 Ves. & Beanies ISO.

An injunc'tion was granted on a bill to restrain the trustees of a
Friendly Society from apj)lying any of its funds to the payment of the

'M)2

Chap. V] DISSOLUTION [§69

^'Equity takes cognizance of the affairs of such asso-
ciations and grants rehef by treating them as partner-
ships or by looking into the scheme and compelhng con-
formity to it or reforming it and enforcing it; or if the
plan is deemed impracticable, decreeing a dissolution
and distributing the funds; and speaking generally, it
redresses as far as it can the grievances of the mem-
bers of these societies who complain to it of injustice
affecting their pecuniary interests therein." ^

Inactivity continued for a sufficient length of
time may be held to have been a dissolution.''

annuities payable according to its rules, and for dissolution on the
ground that its rules were framed on erroneous principles and the an-
nuities had become so numerous as to be likely to exhaust the whole
fund. Reeve v. Parkins, 2 Jacob & Walker 390.

A local lodge of a fraternal order unincorporated voted to dissolve
connection with the Supreme Circle, when a few of its members, as-
suming to act for it, proceeded to incorporate under the laws of New
York. Held: The unauthorized incorporation of the parent circle
materially changed the preexisting legal relations between that body
and its subordinate cncles. "From an association whose obUgation
to and control over its members was entirely voluntarily the Su-
preme Circle by its formal incoi"poration in New York State became
thereafter clothed with compulsory powers over its members." The
purpose for which the subordinate circle had been formed has failed,
and like a partnership it was ipso facto dissolved and its property should
be distributed pro rata to the members by receivers. Pierson v. Gard-
ner, 81 N. J. Eq. 505, 509, 86 Atl. 442.

6 Van Houten v. Pine, 36 N. J. Eq. 133, 137. See Burke v. Roper, .
79 Ala. 138, 144.

Partial distribution may be ordered as a means of reorganization.
Pu-ics V. First Russian Soc, 83 N. J. Eq. 29, 89 Atl. 1036.

^ From 1836 to 1859 no meetings of a Masonic lodge were held.
Pursuant to vote it had sold all property and placed funds in hands of
academy trustees to use as own and return principal on demand. No
officers elected or action taken. Later there was a revival of Masonry
and a new lodge was formed which claims the funds, relying on rule
that officers hold office tiU successors are elected and on the intent of
individual members to resume some day. Held: Such associations
may become dissolved by non-action for a sufficient length of time and
this period seems sufficient. The rule about officers' terms was not
meant to apply to a case like this. Intent of individuals immaterial.
Legal existence of old chapter gone and could not be restored by Grand
Chapter. Strickland v. Prichard, 37 Vt. 324, 327.

Neither loss of corporate property, nor failure to hold regular meet-

303

§ 69] NON-PROFIT ASSOCIATIONS [Chap. V

Death ^ or withdrawal ^ of a member of course does
not produce a dissolution.

Upon dissolution of an association, its net assets
should be divided equally among those who are mem-
bers at that time.^'' If, however, the funds have been im-
pressed with a trust, it will be enforced and the members
are not entitled to divide the funds among themselves. ^^

ings or to elect corporate officers, nor aU combined necessarily amount
to a forfeiture unless continued for a long term of years. But when it
is conceded that the objects of the corporation have been entirely
abandoned or when it appears that the power to resume business does
not exist, then a legal dissolution may be declared. This rule of cor-
porations apphes to unincorporated associations. Kuehl v. Meyer, 50
Mo. App. 648, 656. See Kueld v. Meyer, 42 Mo. App. 474.

Members and officers of a labor xmion joined another similar one
which had a clause in its constitution forbidding members to belong
to any other such organization. The first union did not have such
provision in its constitution. Held: That the first union was not dis-
solved by the act of its officers and that though the rule of the second
union might justify expulsion from that, it did not affect membership
in fact. Farrell v. Dalzell, 5 N. Y. S. 729.

A testatrix left property in remainder to a church. When the life
estate ended it appeared that the chui'ch had had no pastor or meet-
ings for fifteen years. Eleven persons who had been members then
met and elected trustees but did nothing more. Held: An associa-
tion may be dissolved by abandonment as well as by voluntary action.
The action of these individuals could not recreate it. MiUer v. Riddle,
227 111. 53, 58, 81 N. E. 48.

A member of an association cannot compel in equity a return of his
contribution to its funds unless he estabhshes that the purposes of the
association have been abandoned, its operations ceased and its ob-
jects entirely failed. Perversion of funds by trustees wiU be prevented
and the trustees held accountable, but perversion alone does not author-
ize distribution to the members. Roper v. Burke, 83 Ala. 193, 195, 3
So. 439. See ditto, 79 Ala. 138.

8 Ostrom V. Greene, 161 N. Y. 353, 360, 55 N. E. 919 (dictum).

9 Moore v. Telephone Co., 171 Mich. 388, 399, 137 N. W. 241 (sale
of all interest in a farmers' telephone hne).

10 Parks V. Trust Co., 122 N. Y. S. 521, 137 App. Div. 719 (associa-
tion of corporations); U. O. A. D. v. Mullen, 24 O. C. C. 239 (lodge);
Brown ». Dale, 9 Ch. D. 78 (guild); Re Printers', etc. Soc, (1899)
2 Ch. 1H4 (divided pro rain their contributions).

" Smith V. Kerr, (1902) 1 Ch. 774.

The CoiuK'(;tiout Lodge of United Workmen were set off from juris-
diction of th«! Massachusetts Grand Lodge under a Connecticut Grand
Lodge. Latter lirings bill in (>quity for tiiem for proper division of
funds. Hiild : The various lodges and grand lodges are not independent,

304

Chap. V] DISSOLUTION [§ 69

When a fund is held in trust for contributors, it will
be distributed to them in proportion of their contribu-

but are under a common law which comes from the members. "The
complaint alleges that the order is a fraternal insurance organization.
The rights of its members are, accordingly, something more than that
of social association. Rights of property are attached to membership."
Equity will enforce the trust attached to these funds. A. O. U. W. v.
A. O. U. W., 81 Conn. 189, 205, 70 Atl. 617.

Members of a church of a denomination whose rules provide that on
dissolution property vests in a board of the general denomination, can-
not claim thiat on abandonment property should be sold and proceeds
divided among members. Heisler v. Methodist Church, 147 N. W.
750 (la.).

By-laws of a Masonic lodge appropriated its property to promoting
"the good of the craft or relief of indigent and distressed worthy
Masons, their widows and orphans." Held: This is trust for charity,
however derived. Such a body may dissolve but trust fund cannot be
distributed to members. Trust will be executed. Hence this suit by a
member for his share fails. Duke v. FuUer, 9 N. H. 536, 540, 32 Am.
Dec. 392.

A local lodge of K. of P. dissolved and divided its assets among the
members, including trust funds that had accumulated. Law of order
provided that on dissolution all assets vest in Grand Lodge, a corpora-
tion which here sues the individuals who divided up the funds. Held:
Those who took an active part in the division are jointly and severally
hable for the whole fund. Trust funds cannot be diverted from the trust
set forth in the constitutions of supreme and subordinate lodges and
those assisting in breach of trust are hable for the consequences. Grand
Lodge, K. P. V. Germania Lodge No. 50, 56 N. J. Eq. 63, 73, 38 Atl.
341.

Bill by members of charitable association against its treasurer for
an account. The association voted in 1825 to transfer its funds to an-
other society having the same object. Then held no meetings till 1830,
when meeting voted to transfer some of its funds to a seminary not
having the same object. Apparently first vote was not carried out.
Held: Associations for charity are trustees of funds contributed. Offi-
cers will as trustees be bound to account. Contributions must be deemed
made according to the articles of agreement whether called constitu-
tion or by-laws. If so provided, majority may control minority within
the purposes of the association. Fund cannot be diverted to different
object without the consent of the contributors, and if the object entii-ely
fails then contributors would be entitled to a refund. The first vote was
to a society having the same objects and so was vahd. The second was
not. Bill sustained. Penfield v. Skinner, 11 Vt. 296, 298.

A meeting of drafted men was held and money contributed to reheve
aU from draft by hii'ing substitutes. No constitution or by-laws. Treas-
urer elected. At a later meeting it was voted that any surplus be given
to charity. After war surplus given to defendant to estabhsh a dispen-
sary. Nine plaintiffs bring bill in equity to recover contributions.
Held: Five were present at meeting that voted to give to charity

305

§ 69] NON-PROFIT ASSOCIATIONS [Chap. V

tions.^2 Individual members of an association do not
upon dissolution acquire the rights of the asso-
ciation in a contract made with them as an
association.^^

As we have seen/^ title to personal property is in the
association. So when a majority of the members vote
to incorporate or combine with another organization,

and they cannot recover. The other four might sue treasurer who
paid money to defendant, but not defendant because no privity of
contract. Contributors to a fund placed in hands of trustees for a
specific purpose have right in equity to surplus not needed for that
object in proportion to contributions. Abels v. McKeen, 18 N. J.
Eq. 462, 464.

In States where the doctrine of cy pres does not exist, when an unin-
corporated religious society ceases to exist, lands held in trust for it
revert to the donor. Pringle v. Dorsey, 3 S. C. 502.

In the case of a burial gi'ound, the heirs of those buried there were
also said to have an interest in the trust estate. Appeal of Gumbert,
110 Pa. St. 496, 1 Atl. 437.

12 Burke v. Roper, 79 Ala. 138, 144.

A fund was raised by subscription for the assistance of the sick and
wounded in the Balkan war. Subscriptions were received at different
times and were apphed by the trustees. After the war there was an un-
expended balance. Held: The rule of Clayton's case, 1 Merivale 572,
608, is inapplicable, and the balance belongs to all the subscribers in
proportion to their subscriptions irrespective of date. British Red
Cross Soc. V. Johnson, (1914) 2 Ch. 419.

1* Expelled members of a church organized separately and by agree-
ment between the two churches the property was to be used by both.
Later the new church disbanded and its individuals attempted to reor-
ganize and enforce rights under the agi'eement. Held: The agreement
was with the church as a society, the rights conferred cannot exist after
the society has been dissolved. The members individually did not ac-
quire the rights of the church when it disbanded. Berryman v. Reese,
50 Ky. 287, 290.

A coll(!ge had contracted that its trustees should be elected by the
synod of Kentucky, which was defined to be that body which is con-
nected with the General Assembly of the Presbyterian church of the
U. S. A. During the war the synod spht and one party adhered to the
(Umcnd Assembly and maintained its organization. The other joined
anotlicr national organization. Both synods elecitcd trustees of the
college!. One H(.'t of trustees brought bill to enforce its rights to the office.
H<'1(1: The contract clearly defines the synod which has the power
to el(!ct and th<TC has be<;n no breach in the continuity of it. No
fiuestion of majority rule can be considered. Kinkead v. McKee, 72
Ky. 535.

'« Sec § 60, note 45.

80G

Chap. V] PARTIES IN LITIGATION [§ 70

those who insist on keeping up the old organization,
however few, are entitled to its property.

§ 70. Parties in Litigation

Just as a partnership at common law cannot sue or
be sued in its firm name, so an association not organ-
ized for profit cannot appear as a party in court as an
association.^ Its members should be joined as individ-
uals.^ If, by mistake, the association is named as a

1 Thurmond v. Cedar Springs Baptist Church, 110 Ga. 816, 36 S. E.
221; Cain v. Armenia Lodge, 12 Ga. App. 251, 77 S. E. 184; Mackenzie
V. Edinburg Board of School Trustees, 72 Ind. 189; Furniture Co. v.
Union, 165 Ind. 421, 423, 75 N. E. 877 (trade union); Nightingale v.
Barney, 4 la. 106 (Masonic lodge); Hanley v. Telephone Co., 150 la.
198, 129 N. W. 807, 808; Workingmen's Bank v. Converse, 29 La. Ann.
369, 370; Littleton v. I. O. U. A. M., 98 Md. 453, 56 Atl. 798; Pickett
V. Walsh, 192 Mass. 572, 590, 78 N. E. 753 (trade union); Detroit
Schuetzen Band v. Detroit Agitations Verein, 44 Mich. 313, 6 N. W.
675; Typothetae v. Union, 94 Minn. 351, 102 N. W. 725, 727; Cleland v.
Anderson, 66 Neb. 252, 272, 92 N. W. 306, 96 N. W. 212, 98 N. W. 1075;
Bossert v. Dhuy, 151 N. Y. S. 877 (App. Div.) (trade union) ; Church
V. CUfton, 34 Tex. Civ. App. 248, 78 S. W. 732; Home Benefit Ass'n v.
Weston, 146 S. W. 1022 (Tex. App.); SmaU v. Federation, 5 Ont. L. R.
456, 458 (trade union); Kingston v. Salvation Army, 6 Ont. L. R. 406,
411, aff'd 7 Ont. L. R. 681.

Where a trade union was used as such and enjoined, it could not for
the first time raise the question of proper parties on the contempt pro-
ceedmg. Barnes Co. v. Chicago Union, 232 111. 402, 83 N. E. 932.

An unincorporated church cannot sue in its association name, but
may elect trustees to do so. Arts v. Guthrie, 75 la. 674, 677, 37 N. W.
395.

An action cannot be instituted in the name of an unincorporated
church "by" certain designated officers unless it has complied with the
statute requiring registration of the name, style and object of the asso-
ciation. Mutual Life Co. v. Inman Parks Church, 111 Ga. 677, 679, 36
S. E. 880.

Churches in West Virginia cannot be incorporated and so cannot
sue or be sued as such. Lunsford, etc. Co. v. Wren, 64 W. Va. 458, 465,
63 S. E. 308.

2 Suit against labor union to restrain boycott. Seattle Co. v. Han-
sen, 144 Fed. 1011 (C. C. — Cal.); SoUer v. Mouton, 3 La. Ann. 541;
LiUy V. Tobbein, 13 S. W. 1060 (Mo.) (church); Schmidt v. Gunther,
5 Daly 452 (N. Y.).

At common law, apart from statute, aU members of an imincor-
porated fraternal order must sue on a bond given to it in its associa-

307

§ 70] NON-PROFIT ASSOCIATIONS [Chap. V

party, in some States an amendment to the names of
indmdual members is held improper.^ TMien the mem-
bers were named as individuals it has been held not im-
proper practice to add the name of the association "to
distinguish them in their associated capacity," ^ but
the association as such should not execute an appeal
bond for them.^

If a plaintiff brings an action against only part of
the members, they may plead that fact in abatement,^

tion name. Misnomer in the bond may be cured by evidence that the
association commonly was known by that name. O'Connell v. Lamb,
63 111. App. 652, 656.

A note and mortgage was made to the Southwestern Baptist Asso-
ciation. Held: An action on it by the members of the executive board
of the association should be dismissed. If not a corporation, the mem-
bers of the association should sue as partners. Jones v. Watson, 63
Ga. 679.

3 Maisch v. O. A., 223 Pa. St. 199, 200, 72 Atl. 52S (benefit society);
Nunn V. Louisville, 31 Ky. Law Rep. 1293, 105 S. W. 119, 121 (statute
of hmitations had run).

But when an association had been incorporated and by mistake
suit was brought by the corporation, an amendment was allowed after
the statute of limitations had nm bringing in members of the associa-
tion as plaintiffs. LiUy v. Tobbein, 13 S. W. 1060, 1062 (Mo.).

Where union and some members were simimoned as defendants,
they were ordered to amend and aver that the indix-iduals were mem-
bers of the association. American, etc. Co. v. Wire Drawers, etc. Union,
90 Fed. 598, 600.

iNIasonic lodge which had been incorporated sued to escape taxa-
tion as a charitable corporation but the plaintiff as described was an
unincorporated association. Held: Against defendant's objection
cannot amend so as to make the corporation plaintiff, for that would
be to insert a new party. Marsh River Lodge, F. & A. M. v. Brooks,
61 Me. 585, 587.

* Hanlev v. Telephone Co., 150 la. 198, 129 N. W. 807, 808 (farmers'
telephone line); S. v. Live Stock Exchange, 211 Mo. 181, 109 S. W.
675.

s Under\^Titers v. Mercantile Co., 131 111. App. 617, 620.

« Pickett V. Walsh, 192 Mass. 572, 78 N. E. 753 (trade union);
Robinson v. Robinson, 10 Me. 240, 243; Hogdon v. Gardner, 2 Ohio
Cir. Court 340, 343; see Richardson v. Hixstings, 7 Beav. 301, 323,
11 Beav. 17.

Members of live stock exchange expelled must join all the directors.
Greer v. Stolior, 77 Fed. (C. C. — Mo.).

In an action on a note given by an association to one of its mem-
bers and endorsed by certain others brought against the endorsers,

308

Chap. V] PARTIES IN LITIGATION [§ 70

but in that case the defendant must aver who are the
proper parties.^

In suits in equity, where the members are numerous,
however, the usual equity rule is applied and a few are
allowed to sue on behalf of themselves and all others
who may join.^ Those who sue on an obligation due
the association must show their authority to act for the
rest.® The petition should set forth facts to justify such

Held: AU members should be brought in as partners and all rights
settled in one proceeding. Conway v. Zender, 154 Wis. 479, 143 N.
W. 162.

^ Humbert v. Abeel, 7 N. Y. Civ. Proc. 417.

8 Beatty v. Kurtz, 2 Pet. 566, 584 (church); Callsen v. Hope, 75
Fed. 758, 760 (D. C. — Alaska) (bill by members of a church to en-
join trespass on its real estate); Whitney v. Mayo, 15 111. 251, 255
(church) ; Pipe v. Bateman, 1 la. 369 (emigrant aid society) ; McConneU
V. Gardner, Morr. 272 (la.) (chm-ch); Payne v. Lodge, 115 S. W. 764
(Ky.) (lodge); Birmingham v. Gallagher, 112 Mass. 190, 192 (benefit
society); Snow v. Wlieeler, 113 Mass. 179, 185 (trade union); Lilly v.
Tobbein, 13 S. W. 1060, 1062 (Mo.) (reUgious association); Bloets v.
Simon, 12 N. Y. Civ. Proc. 114, 19 Abb. N. C. 88 (N. Y.) (trade union
suit under code); Marshall v. Loveless, 1 N. C. 325 (one member sued);
Liggett V. Ladd, 17 Ore. 89, 94, 21 Pac. 133 (church); Liederkranz
Singing Society v. Germania Turn-Verein, 163 Pa. St. 265, 268, 29
Atl. 918 (music club); Nance v. Busby, 91 Tenn. 303, 315, 18 S. W.
874 (church); Perkins v. Siegfried, 97 Va. 444, 450, 34 S. E. 64; Smith
V. Nelson, 18 Vt. 511, 568 (one member sued); Lloyd v. Loaring, 6 Ves.
Jr. 773, 776 (Masonic lodge).

Defendant signed a subscription paper towards improvements on a
Catholic church. Paper named no payee. Title to the property was
in the bishop. He sued as bishop for himself and the St. T. Church,
a rehgious association unincorporated, the members of which are too
numerous to be brought before the court. Held: Proper plaintiff.
Egan V. Bonacum, 38 Nebr. 577, 579, 57 N. W. 288.

9 Determann v. Luehrsmann, 74 la. 275, 278, 37 N. W. 330 (church);
Smith V. Pinney, 86 Mich. 484, 493, 49 N. W. 305 (church).

It has also been said that such practice will be permitted "if with
the consent or by the direction of the rest or a majority of them."
Payne v. Lodge, 115 S. W. 764 (Ky.). See Marshall v. Loveless, 1 N.
C. 325, Cameron and Nor. 217, 284.

Bill by member of reUgious association dismissed because it did not
appear to be brought at the instance of a majority of the church or a
majority of the male members, but at the election of one member only,
which is insufficient in the case of a private charity. Parker v. May,
5 Cush. 336, 351.

The deacons of a Baptist church as such have no power to sue with

309

§ 70] NON-PROFIT ASSOCIATIONS [Chap. V

a course.^" The practice in some States has been ex-
tended to actions at law.^^ So where the defendants are
alleged to be numerous, a few may be joined/^ and an
injunction against them as individuals will restrain
illegal action by them in their associate capacity ^^ and
will bind all who have notice whether parties or not.^^
It is always a question for the court whether those
brought in are fairly representative.^^ In a bill in equity
by a member of a benefit society to collect a benefit
payment out of the funds of the order it was held suf-

respect to church property, control of which rests in the congregation.
Drew V. Hogan, 26 App. D. C. 55, 59.

1" McConnell v. Gardner, Morr. 272 (la.) (chiu'ch). In representa-
tive actions the nature of the conunon interest must appear. Habicht
V. Pemberton, 4 Sand. 657 (N. Y.).

" Klein v. Rand, 35 Pa. Sup. Ct. 263, 267; Stemmerman v. Lihen-
thal, 54 S. C. 440, 448, 32 S. E. 535 (under code). But see Habicht v.
Pemberton, 4 Sand. 657, 658 (N. Y.). In the absence of statute it has
been refused. Westbrook v. Griffin, 132 la. 185, 187, 109 N. W. 608
(farmers' telephone line).

12 Smith V. Swormstedt, 16 How. 288, 302 (rehgious society) ; Even-
son V. Spaulding, 150 Fed. 517, 523 (C. C. A.) (unfair competition);
Gorman v. Russell, 14 Cal. 531, 539 (mutual benefit association);
Fitzpatrick v. Rutter, 160 111. 282, 286, 43 N. E. 392 (trade union);
Union v. Barnes, 134 111. App. 11, 18 (contempt against union); Keller
V. Tracy, 11 la. 530 (church); Pickett v. Walsh, 192 Mass. 572, 590,
78 N. E. 753 (trade union); Van Houten v. Pine, 36 N. J. Eq. 133, 138
(Masonic benefit society, " It is enough if so many be made parties as
to insure a fair and honest trial," president and treasurer enough);
Kimball v. Lower Columbia Ass'n, 67 Ore. 249, 135 Pac. 877 (church);
Branson v. I. W. W., 30 Nev. 270, 95 Pac. 354 (trade union. At law,
by statute); Roofing Co. v. Int. Ass'n, 5 Ont. L. T. 424, 9 Ont. L. R.
171, 178 (tort for conspiracy against trade union).

" American Steel, etc. Co. v. Wu-e Drawers, etc. Union, 90 Fed.
598, 603.

" American Steel, etc. Co. v. Wire Di-awers, etc. Union, 90 Fed. 598, 604,

'^ "In the case of an organized strike of laborers it is fair enough if
the leaders of the strike be brought in to roj^rcscnt the organization no
matter what their official relation to the society may be." Duly elected
officfirs for tliaf. ])ur])ose will suffice as plaintiffs but cannot be made
reqiilKitc as (icfendunts. American Steel, etc. Co. v. Wire Drawers, etc.
Union, 90 VvA. 5i)S, 607.

Service on members who did not authorize the torts will not justify
nil injunction against otiuTs not served. Hill v. Eagle Co., 219 Fed.
717 (C. C. A. — W. Va.).

310

Chap. V] PARTIES IN LITIGATION [§ 70

ficient to join as defendant the treasurer, who was in pos-
session of the funds as trustee and its chief executive
officer.^®

A treasurer of an association as such cannot sue to
recover property of which the by-laws give him cus-
tody.^'^ But officers can sue on obligations running to
them as officers. ^^ It is no objection that both plain-
tiff and defendant are members of the same associa-
tion.19

By statute in several States unincorporated asso-
ciations like corporations may sue and be sued in their
association names. ^° In New York an association of

1* The proceeding was said to be in the nature of the estabhshment
of an equitable hen. Colley v. Wilson, 86 Mo. App. 396, 402; Harris
V. Wilson, 86 Mo. App. 406, 420.

President and treasurer sufficient. Payment ordered out of surplus.
Van Houten v. Pine, 36 N. J. Eq. 133, 137.

" DeveUe v. Plummer, 5 Col. App. 113, 37 Pac. 947.

18 Hecker v. Cook, 20 Col. App. 282, 78 Pac. 311 (bond running to
treasurer); Whitcomb v. Smart, 38 Me. 264, 266 (note to "E. W., P.
S. of A." of a lodge. Suit properly brought in his name though he had
retired from office); Bridenbeker v. Hoard, 32 How. Pr. 289 (N. Y.)
(authority by statute to sue) ; Rhodes v. Maret, 45 Tex. Civ. App. 593,
101 S. W. 278.

Upon a written promise to pay money "to the treasurer of" an un-
incorporated society, the members of the society, not the treasurer, are
the proper parties plaintiff. Ewing v. Medlock, 5 Porter 82 (Ala.).

An unincorporated company borrowed money and took a note to
the order of "the Captain of Company A." At the time of suit there
was no captain and by vote of the company the note was transferred
to plaintiff to hold and collect for the company. Held : This gave him
sufficient interest to maintain the bill. (Query, if bill in equity.)
Waugh V. Andel, 21 111. App. 389.

The treasurer of an unincorporated church may sue in his own name
on subscriptions made to him as treasurer for building a church if in
pursuance of the subscription he had commenced the construction.
The words "as treasurer," etc., the association having no corporate ex-
istence, may be regarded as surplusage. McDonald v. Gray, 11 la. 508.

Statute required a society to file certificate with clerk of election of
trustees. Held : This not condition precedent to action by trustees on
claim of the society. Hence, society cannot sue again claiming former
suit invahd. Roberts v. Hill, 137 Ind. 215, 36 N. E. 843.

" Whitcomb v. Smart, 38 Me. 264, 266.

20 Ex parte HiU, 165 Ala. 365, 369, 51 So. 786.

The association is the only proper defendant. Judgment binds prop-

311

§ 70] NON-PROFIT ASSOCIATIONS [Chap. V

over seven members may sue and be sued in the name of
its president,-^ but action may still be brought against all
the members as at conmion law,- or by a few on behalf
of all. 2^ Apart from these statutes an association in

erty of the association only. Davidson v. Knox, 67 Cal. 143, 146, 7 Pac.
413; Mokelumne Co. v. Knox, 7 Pac. 415 (Cal.).

But see Gieske v. Anderson, 77 Cal. 247, 248, 19 Pac. 421, where a
treasurer of an association was allowed to sue a former treasurer for
funds he had retained.

If statute does not take away right to sue individuals, it is not un-
constitutional. Heater Co. v. Union, 129 :Mich. 354, 362, 88 N. W. 889.

Powhatan Steamboat Co. v. Potomac Steamboat Co., 36 Md. 238,
244; Littleton v. I. O. U. A. M., 98 IMd. 453, 56 Atl. 798; Cornfield v.
Order Brith Abraham, 64 Minn. 261, 263, 66 N. W. 970; Saunders v.
Am. Express Co., 71 N. J. L. 270, 57 Atl. 899, 58 Atl. 1101; King ;;.
Nichols, 2 Ohio Dec. (reprint) 564.

By statute in jNIassachusetts an imincorporated church is entitled
to receive and to sue for gifts and donations, so that an information in
the name of the Attorney General is not an appropriate remedy for
breach of trust with reference to its trust funds. Attornev General v.
Clark, 167 Mass. 201, 204, 45 N. E. 183.

21 Ruhl V. Ware, 4 N. Y. S. 624; Winter v. Hamm, 5 N. Y. Civ. Proc.
194, 196; Cohn v. Borst, 36 Hun 562; IMcGljom v. Post, 21 Abb. N. C.
97.

By statute in New York creditors of a joint stock association must
first sue the president and collect out of the assets of the association.
If they cannot collect, then thej' may sue indi\'idual members of asso-
ciation. The recovery in the first suit is not made conclusive in the
second. The association here was hable as undisclosed principal for
the acts of its superintendent. But since undisclosed, the liabihty did
not continue after it had transferred its assets to a corporation. Like
dormant partners, not bound to give notice of termination of authority.
If had been known as principal, notice of termination of authority
would have been necessary. Allen v. Clark, 65 Barb. (X. Y.) 563, 574,
575.

Statute authorized action by president of voluntary association re-
gardless of whether members of association reside or transact their busi-
ness in the State. Clancy v. Terhune, 1 N. Y. Citv Ct. 239. See Coombe
V. Harford, 99 Me. 426, 433, 59 Atl. 529.

"As between an individual member on the one hand and the asso-
ciation in its official capacity on the other, the association is to be re-
garded as a guasi corporation capable of being sued by such member for
any breach of its official obligations. (Under code.) Ex])ulsion. Win-
ter V. Hamm, 5 N. Y. Civ. Proc. 194, 196.

« Schwartz v. Welcher, 20 N. Y. S. 861; Peckham v. Wentworth, 116
N.Y. H.781.

» Bloetc t;. Simon, 12 N. Y. Civ. Proc. 114, 19 Abb. N. C 88; Rourkc
V. Drug Co., 77 N. Y. S. 373, 75 App. Div. 145.

Action for conspiracy and combination to prevent plaintiff from car-

312

Chap. V] PARTIES IN LITIGATION [§ 70

New York cannot sue.^^ In Massachusetts a trade
union may sue by an officer to enjoin unlawful use of its
trade mark, the union label. ^^

A statute providing for service of process on an agent
of an unincorporated association does not deprive
members of their rights without due process of law.^®
The usual rules of evidence are applied."
Thus the books of the association are admissible
evidence to prove its action.-^ When the defendant
failed to produce under subpoena its constitution and

rying on his trade. One of defendants was named as president of asso-
ciation as well as an individual. On demurrer it was contended that
under the statute the plaintiff could not sue members of an unincor-
porated association of more than seven members when action is also
brought against its president or treasurer till after final judgment in that
latter action. Held: Statute apphes only to the Uabihty of members
of the association as such. May sue association and individual mem-
bers in same action on a personal Habihty of the member. April v.
Baird, 52 N. Y. S. 973, 32 App. Div. 226, 28 N. Y. Civ. Proc. 29.

24 Hawke v. Cigar Makers' Union, 58 N. Y. S. 412.

Apart from statute an unincorporated fire company cannot sue in
the name of its foreman and recover possession of an engine from an-
other fire company. Statute did not apply here. Masterson v. Botts,
4 Abb. Pr. (N. Y.) 130.

Under certain statutes an association could not sue as the real party
in interest under an express trust created by the statutes because the
statute gave the rights to the members of the association as individuals,
and not as an association. Corning v. Greene, 23 Barb. (N. Y.) 33, 45.

26 Tracy v. Banker, 170 Mass. 266, 49 N. E. 308.

26 Appeal of Baylor, 93 S. C. 414, 77 S. E. 59.

2^ Printed copy of minutes of meetings identified by secretary of
church were properly admitted. Godfrey v. Walker, 42 Ga. 562, 571.

Opinion of officers as to meaning of by-laws inadmissible when
free from ambiguity. Brendon v. Worley, 28 N. Y. S. 557, 8 Misc.
253.

Under by-laws no dissolution of association should occur so long as
sixty voted to maintain it, in an action arising out of an attempt of the
majority to consohdate, evidence of members voting against consoh-
dation should have been admitted. Rosenthal v. Reinfeld, 96 N. Y. S.
199, 48 Misc. 652.

Testimony of a witness as to the number of members of a congrega-
tion that desired affiUation with a certain church organization held im-
properly excluded. Dochkus v. Lithuanian Soc, 206 Pa. St. 25, 30, 55
Atl. 779.

28 Francis v. Perry, 144 N. Y. S. 167, 82 Misc. 271.

313

§ 70] NON-PROFIT ASSOCIATIONS [Chap. V

by-laws, oral evidence as to the manner of its organ-
ization and its membership were admitted.-^

On the issue whether a certain book was a church
record or a private memorandum of the pastor, the
court said: ''It appears that during the whole time it
was kept, Dr. Puffer was the minister of the parish and
pastor of the church, that the book was kept wholly or
principally by him, and that the pastor is the proper
officer to keep such a record. On inspection, it appears
to be a regular statement, in proper form for a record,
of the admission of members, the choice of officers, and
the transaction of the ordinary business of the church.
We must take notice of a usage so general as that of
a church to keep a record. It is also to be considered,
that the law recognizes the existence and organization
of a church as an aggregate body, takes notice of its
acts and doings and annexes thereto various civil rights
and powers. It is in virtue of this organization and
these proceedings that deacons are elected; and being
thus elected, they are empowered and qualified by the
law to sue as a corporation. The law therefore does,
by necessary implication, authorize and require a
church, by a proper officer, to keep some record of its
acts." The book was held a church record.^**

29 Haden v. Clark, 10 N. Y. S. 291, 32 N. Y. St. 478.

30 Sawyer v. Baldwin, 11 Pick. 492, 493.

314

APPENDIX OF FORMS

Note

It seems desirable in connection with a work on the law
of associations intended primarily for use by practitioners
to include forms of the indentures of trust which are used
by modern business organizations. A collection of such forms
is therefore printed in tliis appendix. In using them, how-
ever, the reader should bear in mind that owing to the great
flexibility of this form of organization the trust instru-
ments under which they are instituted are of great variety
and usually contain some modification made with a view to
the peculiar circumstances of the enterprise to be under-
taken in a given instance. For this same reason, however,
it is difficult to prepare normal forms suitable for use with-
out change under all circumstances. It has seemed best,
therefore, to print in this appendix copies of instruments
which have actually been used. These will serve to illus-
trate for the reader the land of association referred to in the
text and the essential features of each will be readily iden-
tified by one desiring to frame a new instrument along the
same lines.

The forms herein are of three sorts. The trust deed of
the original Standard Oil Trust (Appendix p. 318) is in-
cluded chiefly for historical reasons because it was one of
the first of these instruments to come under the review of
the courts. It is also interesting to compare this early
form with the more highly developed modern forms. It is
the instrument referred to in State v. Standard Oil Co.,
49 Ohio St. 137 and Rice v. Rockefeller, 134 N. Y. 174.
The deed of the original sugar trust will be found in People
V. North River Sugar Refineries, 102 N. Y. 582. There
are also included the indentures of trust which were before
the Court in some of the important recent cases. These
instruments are not printed in full in the reports of the
opinions of the Court but are found in the original papers.

315

APPENDIX OF FORMS

Since thej' are inaccessible to most attorneys it seems de-
sirable to print them here because the distinction between
partnership and trust as laid down in the recent cases de-
pends upon the form these instruments have taken. These
are the Coplej- Square Trust (Appendix p. 329) passed on
in the case of Wilhams v. Boston, 208 ]\Iass. 497; the Park
Square Trust (AppendLx p. 342) passed on in the case of
"Wilhams v. Johnson, 208 ]Mass. 544; the Boston Personal
Property Trust (Appendix p. 352) passed on in the case of
Williams v, jMilton, 215 ]Mass. 1; and the declaration of
trust and "by-laws" passed on in the case of Frost v.
Thompson, 219 :Mass. 360 (Appendix p. 363).

In addition to these are printed a form of indenture of
trust for a holding company holding securities of public
ser\'ice corporations (Boston Suburban Electric Companies,
Appendix p. 373); a manufacturing company (The Ludlow
^Manufacturing Associates, Appendix p. 388); a form of in-
denture of trust for the construction and ownership and
management of a building (Blank Hotel Trust, Appendix
p. 400) ; and a form for an industrial enterprise (The North
American Companies, Appendix p. 424). In connection
with these, forms for limitation of liability to be inserted in
leases (Appendix p. 454) and bonds (Appendix p. 455) are
included. The forms for resignation and appointment of
new trustees are simple and easily drawn by reference to
the terms of the particular instrument of trust. It is highly
important, however, that the draftsman should assure him-
self that the procedure strict^ conforms to the require-
ments of the trust instrument. It is usually required where
real estate is involved that a formal certificate, or certifi-
cates, showing the change of trustee be recorded in the
appropriate registry'- of deeds. These also are simple in-
struments forms for which are printed (Appendix p. 361),
but it is essential that they follow strictly the terms of the
indenture of trust, otherwise much annoyance will be caused
in future examinations of title.

In connection with the use of these forms it is important
for the practitioner to bear in mind that even in Massa-
chusetts, where the law has been most fully developed, the
application of the distinction between partnership and trust
to the different provisions of these instruments is not yet
entirely clear, and that most of the forms now in use, in-

31G

NOTE

eluding most of those printed herein, are of date prior to the
decision of WiUiams v. Milton, 215 Mass. 1, and all of them
prior to Frost v. Thompson, 219 Mass. 360, the latter case
apparently holding that power to remove trustees at any
time and appoint successors and to amend the declara-
tion of trust when vested in shareholders are sufficient to
make the shareholders partners and not mere beneficiaries
to the trust. (All of these cases are discussed in Sec. 14).
The indenture of the Boston Personal Property Trust,
which is a somewhat unusual form (Appendix p. 352), is
the only one which has been distinctly held to be a trust and
not a partnership. In that same case there was a dictum
that the declaration of trust of the Park Square Trust
(Appendix p. 342) was a trust and not a partnership, al-
though in the case of Williams v. Johnson, 208 Mass. 544,
there had been a previous dictum that this same declara-
tion created a partnership. The tendency probably will be
either to eliminate the right of association of shareholders
in meetings or to substitute for the power to direct and re-
move trustees and terminate the trust by affirmative vote
binding on the trustees, authority to the trustees to do these
acts with the consent of the shareholders expressed by vote
at a meeting.

The form of bond of the Blank Electric Companies (Ap-
pendix p. 455) is an attempt to avoid the objection that an
obligation payable out of a specific fund is not negotiable.
It is made payable to a named person who assigns it in blank.
The holder who filled in his name would at least have
prima facie title in an action on it.

There is also printed herein a form of constitution and by-
laws of a famous social club. It is on forms such as these
that are based the great variety of instruments organizing
non-profit associations.

317

STANDARD OIL TRUST

(State V. Standard Oil Co., 49 Ohio St. 137; Rice v. Rockefeller, 134
N. Y. 174)

This Agreement, made and entered upon this second
day of January, a.d. 1882, by and between all the persons
who shall now or may hereafter execute the same as par-
ties thereto, witnesseth:

I. It is intended that the parties to this agreement shall
embrace three classes, to-wit:

1. All the stockholders and members of the following cor-
porations and limited partnerships, to-wit:

Acme Oil Company (New York); Acme Oil Company
(Pennsylvania); Atlantic Refining Company, of Phila-
delphia; Bush & Co., limited; Camden Consohdated Oil
Company; Elizabethport Acid Works; Imperial Refining
Company, limited; Chas. Pratt & Co.; Paine, Ablett &
Co., limited; Standard Oil Company (Ohio); Standard Oil
Company (Pittsburg); Smith's Ferry Oil Trans. Company;
Solar Oil Company, limited; Stone & Fleming Manufac-
turing Company, limited.

Also, all the stockholders and members of such other cor-
porations and limited partnerships as may hereafter join
in this agreement at the request of the trustees herein pro-
vided for.

2. The following individuals, to-wit:

W. C. Andrews, Jno. D. Archbold, Lide K. Arter, J. A.
Bostwick, Benj. Brewster, D. Bushnoll, Thos. C. Bushncll,
J. N. Camden, Henry L. Davis, li. M. Flagler, Mrs. H. M.
Flagler, H. M. Harma and Geo. W. Chapin, D. M. Harkness,
D. H. Harkness, trustee, S. V. Harkness, John Huntington,
H. A. Hutchiiis, Chas. F. G. Heye, O. B. Jennings, Chas.
Lockhart, A. M. McGregor, Wm. H. Macy, Wm. H. Macy,
Jr., Estate of Josiah Macy, Jr., Wm. H. Macy, Jr., execu-
tor, O. H. Payne, 0. H. Payne, trustee, Chas. Pratt, Horace

318

STANDARD OIL TRUST

A. Pratt, C. M. Pratt, A. J. Pouch, John D. Rockefeller,
Wm. Rockefeller, Henry H. Rogers, W. P. Thompson, J. J.
Vandergrift, William T. Wardwell, W. G. Warden, Jos. L.
Warden, Warden, Frew & Co., Louise C. Wheaton, Julia H.
York, and Geo. H. Vilas, M. R. Keith, and Geo. F. Chester,
trustees.

Also, all such individuals as may hereafter join in this
agreement at the request of the trustees herein provided
for.

3. A portion of the stockholders and members of the
following corporations and limited partnerships, to-wit:

American Lubricating Oil Co., Baltimore United Oil
Co., Beacon Oil Co., Bush & Denslow Manufacturing Co.,
Central Refining Co., of Pittsburg, Chesebrough Manu-
facturing Co., Chess Carley Co., Consolidated Tank Line
Co., Inland Oil Co., Keystone Refining Co., Maverick
Oil Co., National Transit Co., Portland Kerosene Oil Co.,
Producers' Consolidated Land and Petroleum Co., Signal
Oil Works, limited, Thompson & Bedford Co., limited,
Devoe Manufacturing Co., Eclipse Lubricating Oil Co.,
limited, Empire Refining Co., limited, Franklin Pipe Co.,
limited. Galena Oil Works, limited, Galena Farm Oil Co.,
limited, Germania Mining Co., Vacuum Oil Co., H. C.
Van Tine & Co., limited, and Waters-Pierce Oil Co.

Also, stockholders and members (not being all thereof)
of other corporations and limited partnerships who may
hereafter join in this agreement at the request of the trus-
tees herein provided for.

II. The parties hereto do covenant and agree to and with
each other, each in consideration of the mutual covenants
and agreements of the others, as follows:

1. As soon as practicable, a corporation shall be formed
in each of the following states under the laws thereof, to-wit :
Ohio, New York, Pennsylvania and New Jersey; provided,
however, that instead of organizing a new corporation, any
existing charter and organization may be used for the pur-
pose when it can advantageously be done.

2. The purposes and powers of said corporation shall
be to mine for, produce, manufacture, refine and deal in
petroleum and all its products and all the materials used in
such businesses, and transact other business collateral
thereto. But other purposes and powers shall be embraced

319

APPENDIX OF FORMS

in the several charters, such as shall seem expedient to the
parties procuring the charter, or, if necessary to comply
with the law, the powers aforesaid may be restricted and
reduced.

3. At any time hereafter, when it may seem advisable to
the trustees herein provided for, similar corporations may
be formed in other states and territories.

4. Each of said corporations shall be known as the Stan-
dard Oil Company of (and here shall follow
the name of the state or territor}^ by virtue of the laws of
which said corporation is organized).

5. The capital stock of each of said corporations shall
be fixed at such an amount as may seem necessary and ad-
visable to the parties organizing the same, in view of the
purpose to be accomplished.

6. The shares of stock of each of said corporations shall
be issued only for money, property or assets, equal at a fair
valuation to the par value of the stock deHvered therefor.

7. All of the property, real and personal, assets and
business of each and all of the corporations and limited
partnerships mentioned or embraced in class first shall be
transferred to and vested in the said several Standard Oil
Companies. All of the property, assets and business in,
or of, each particular state, shall be transferred to and vested
in the Standard Oil Company of that particular state, and
in order to accomplish such purpose, the directors and
managers of each and all of the several corporations and
limited partnerships mentioned in class first, are hereby
authorized and directed by the stockholders and mem-
bers thereof (all of them being parties to this agreement),
to sell, assign, transfer, convey and make over, for the
consideration hereinafter mentioned, to the Standard Oil
Company or companies of the proper state or states, as
soon as said corporations are organized and ready to receive
the same, all the property, real and personal, assets and
business of said corporations and limited partnerships.
Correct schedules of such property, assets and business shall
accompany each transfer.

8. The individuals embraced in class second of this agree-
ment do each for liimself agree, for the consideration here-
inafter mentioned, to sell, assign, transfer, convey and set
over all the property, real and personal, assets and business

320

STANDARD OIL TRUST

mentioned and embraced in schedules accompanying such
sale and transfer to the Standard Oil Company or companies,
of the proper state or states, as soon as the said corpora-
tions are organized and ready to receive the same.

9. The parties embraced in class third of this agreement
do covenant and agree to assign and transfer all of the
stock held by them in the corporations or limited partner-
ships herein named, to the trustees herein provided for,
for the consideration and upon the terms hereinafter set
forth. It is understood and agreed that the said trustees
and their successors may hereafter take the assignment of
stocks in the same or similar companies upon the terms
herein provided, and that whenever and as often as all the
stocks of any corporation or Hmited partnership are vested
in said trustees, the proper steps may then be taken to have
all the money, property, real and personal, of such cor-
poration or partnership assigned and conveyed to the
Standard Oil Company of the proper state, on the terms and
in the mode herein set forth, in which event the trustees
shall receive stocks of the Standard Oil Companies equal
to the value of the money, property and business assigned,
to be held in place of the stocks of the company or com-
panies assigning such property.

10. The consideration for the transfer and conveyance
of the money, property and business aforesaid to each or any
of the Standard Oil Companies, shall be stock of the respec-
tive Standard Oil Company to which said transfer or con-
veyance is made, equal at par value to the appraised value
of the money, property and business so transferred. Said
stock shall be delivered to the trustees hereinafter provided
for, and their successors, and no stock of any of said com-
panies shall ever be issued except for money, property or
business equal at least to the par value of the stock so issued,
nor shall any stock be issued by any of said companies for
any purpose, except to the trustees herein provided for,
to be held subject to the trusts hereinafter specified.
It is understood, however, that this provision is not in-
tended to restrict the purchase, sale and exchange of
property by said Standard Oil Companies as fully as they
may be authorized to do by their respective charters, pro-
vided only that no stock be issued therefor except to said
trustees.

321

APPENDIX OF FORMS

II. The consideration for any stocks delivered to said
trustees as above pro\aded for, as well as for stocks delivered
to said trustees by persons mentioned or included in class
third of tliis agreement, shall be the delivery by said trus-
tees to the persons entitled thereto, of trust certificates
hereinafter provided for, equal at par value to the par value
of the stocks of the said Standard Oil Companies so received
by said trustees, and equal to the appraised value of the
stocks of other companies or partnerships delivered to said
trustees. (The said appraised value shall be determined
in a manner agreed upon by the parties in interest and the
said trustees.) It is understood and agreed, however, that
the said trustees may, with any trust funds in their hands, in
addition to the mode above provided, purchase the bonds
and stocks of other companies engaged in business similar
or collateral to the business of said Standard Oil Companies,
on such terms and in such mode as they may deem advisable,
and shall hold the same for the benefit of the owners of said
trust certificates, and may sell, assign, transfer and pledge
such bonds and stocks whenever they may deem it advan-
tageous to said trust so to do.

III. The trusts upon which said stocks shall be held,
and the number, powers and duties of said trustees, shall
be as follows:

1. The number of trustees shall be nine.

2. J. D. Rockefeller, O. H. Payne and Wm. Rockefeller
are hereby appointed trustees, to hold their ofiice until the
first Wednesday of April, a.d. 1885.

3. J. A. Bostwick, H. M. Flagler and W. G. Warden
are hereby appointed trustees, to hold their office until the
first Wednesday of April, a.d. 1884.

4. Chas. Pratt, Benj. Brewster and Jno. D. Archbold
are hereby appointed trustees, to hold their office until the
first Wednesday of April, a.d. 1883.

5. Elections for trustees to succeed those herein appointed
shall be held annually, at which election a sufficient number
of trustees shall be elected to fill all vacancies occurring either
from expiration of the term of the office of trustee or from
any other cause. All trustees sluiU be elected to hold their
office for three years, except those elected to fill a vacancy
arising from any cause, except expiration of term, who
shall be elected for the balance of the term of the trustee

322

STANDARD OIL TRUST

whose place they are elected to fill. Every trustee shall
hold his office until his successor is elected.

6. Trustees shall be elected by ballot by the owners of
trust certificates or their proxies. At all meetings the owners
of trust certificates, who may be registered as such on the
books of the trustees, may vote in person or by proxy and
shall have one vote for each and every share of trust cer-
tificates standing in their names, but no such owner shall
be entitled to vote upon any share which has not stood in
his name thirty days prior to the day appointed for the elec-
tion. The transfer books may be closed for thirty days im-
mediately preceding the annual election. A majority of the
shares represented at such election shall elect.

7. The annual meeting of the owners of the said trust
certificates for the election of trustees, and for other business,
shall be held at the office of the trustees, in the city of
New York, on the first Wednesday of April of each year,
unless the place of meeting be changed by the trustees,
and said meeting may be adjourned from day to day until its
business is completed. Special meetings of the owners of
said trust certificates may be called by the majority of the
trustees at such times and places as they may appoint. It
shall also be the duty of the trustees to call a special meet-
ing of holders of trust certificates whenever requested to do
so by a petition signed by the holders of ten per cent, in
value of such certificates. The business of such special
meetings shall be confined to the object specified in the no-
tice given therefor. Notice of the time and place of all
meetings of the owners of trust certificates shall be given,
by personal notice as far as possible, and by pubKc notice
in one of the principal newspapers of each state, in which a
Standard Oil Company exists, at least ten days before such
meeting. At any meeting, a majority in value of the hold-
ers of trust certificates represented consenting thereto, by-
laws may be made, amended and repealed, relative to the
mode of election of trustees and other business of the hold-
ers of trust certificates, provided, however, that said by-
laws shall be in conformity with this agreement. By-laws
may also be made, amended and repealed at any meeting,
by and with the consent of a majority in value of the holders
of trust certificates, which alter this agreement relative to
the number, powers and duties of the trustees, and to other

323

APPENDIX OF FORMS

matters tending to the more efficient accomplishment of the
objects for which the trust is created, provided only that
the essential intents and purposes of this agreement be not
thereby changed.

8. Whenever a vacancy occurs in the board of trustees
more than sixty days prior to the annual meeting for the
election of trustees, it shall be the duty of the remaining
trustees to call a meeting of the owners of Standard Oil
Trust certificates for the purpose of electing a trustee or
trustees to fill the vacancy or vacancies. If any vacancy
occurs in the board of trustees, from any cause, within sixty
daj^s of the date of the annual meeting for the election of
trustees, the vacancy may be filled by a majority of the
remaining trustees, or, at their option, may remain vacant
until the annual election.

9. If, for any reason, at any time, a trustee or trustees
shall be appointed by any court to fill any vacancy or va-
cancies in said board of trustees, the trustee or trustees so
appointed shall hold his or the respective office or offices
only until a successor or successors shall be elected in the
manner above provided for.

10. Whenever any change shall occur in the board of
trustees, the legal title to the stock and other property held
in trust shall pass to and vest in the successors of said trus-
tees without any formal transfer thereof. But if at any time
such formal transfer shall be deemed necessary or advisable,
it shall be the duty of the board of trustees to obtain the
same, and it shall be the duty of any retiring trustee or
the administrator or executor of any deceased trustee to
make said transfer.

11. The trustees shall prepare certificates which shall
show the interest of each beneficiary in said trust, and de-
liver them to the persons properly entitled thereto. They
shall be divided into shares of the par value of one hundred
dollars each, and shall be known as Standard Oil Trust
certificates, and shall be issued subject to all the terms and
conditions of this agreement. The trustees shall have power
to agree upon and direct the form and contents of said certifi-
cates, and the mode in which they shall be signed, attested
and transferred. The certificates shall contain an express
stipulation that the holders thereof shall be bound by the
terms of this agreement and by the by-laws herein provided for.

324

STANDARD OIL TRUST

12. No certificates shall be issued except for stocks and
bonds held in trust, as herein provided for, and the par
value of certificates issued by said trustees shall be equal to
the par value of the stocks of said Standard Oil Companies,
and the appraised value of other bonds and stocks held in
trust. The various bonds, stocks and monies held under said
trust shall be held for all parties in interest jointly, and the
trust certificates so issued shall be the evidence of the in-
terest held by the several parties in this trust. No duplicate
certificates shall be issued by the trustees, except upon sur-
render of the original certificate or certificates for cancella-
tion, or upon satisfactory proof of the loss thereof, and in
the latter case they shall require a sufficient bond of in-
demnity.

13. The stocks of the various Standard Oil Companies
held in trust by said trustees, shall not be sold, assigned or
transferred by said trustees, or by the beneficiaries, or by
both combined, so long as this trust endures. The stocks and
bonds of other corporations, held by said trustees, may be
by them exchanged or sold and the proceeds thereof dis-
tributed pro rata to the holders of trust certificates, or said
proceeds may be held and reinvested by said trustees for
the purposes and uses of the trust; provided, however,
that said trustees may, from time to time, assign such
shares of stock of said Standard Oil Companies as may be
necessary to quaUfy any person or persons, chosen, or to be
chosen as directors and officers of any of said Standard Oil
Companies.

14. It shall be the duty of said trustees to receive and
safely to keep all interest and dividends declared and paid
upon any of the said bonds, stocks and monies held by them
in trust, and to distribute all monies received from such
sources or from sales of trust property or otherwise, by de-
claring and paying dividends upon the Standard-Trust
certificates as funds accumulated, which, in their judgment,
are not needed for the uses and expenses of said trust. The
trustees shall, however, keep separate accounts of receipts
from interest and dividends, and of receipts from sales or
transfers of trust property, and in making any distribution
of trust funds, in which monies derived from sales or trans-
fers shall be included, shall render the holders of trust
certificates a statement showing what amount of the fund

325

APPENDIX OF FORMS

distributed has been derived from such sales or transfers.
The said trustees may be also authorized and empowered by
a vote of a majority in value of holders of trust certificates,
whenever stocks or bonds have accumulated in their hands
from monej' purchases thereof, or the stocks or bonds held
by them have increased in value, or stock dividends shall
have been declared by any of the companies whose stocks
are held by said trustees, or whenever, from any such cause,
it is deemed advisable so to do, to increase the amount of
trust certificates to the extent of such increase or accumula-
tion of values, and to divide the same among the persons then
owning trust certificates pro rata.

15. It shall be the duty of said trustees to exercise gen-
eral supervision over the affairs of said several Standard Oil
Companies, and as far as practicable, over the other com-
panies or partnerships, any portion of whose stock is held in
said trust. It shall be their duty as stockholders of said
companies to elect as directors and officers thereof, faith-
ful and competent men. They may elect themselves to
such positions when they see fit so to do, and shall en-
deavor to have the affairs of said companies managed and
directed in the manner they may deem most conducive to
the best interests of the holders of said trust certificates.

16. All the powers of the trustees may be exercised by
a majority of their number. They may appoint from their
own number an executive and other committees. A major-
ity of each committee shall exercise all the powers which
the trustees may confer upon such committee.

17. The trustees may employ and pay all such agents
and attorneys as they deem necessary in the management
of said trust.

18. Each trustee shall be entitled to a salary for his serv-
ices not exceeding twenty-five thousand dollars per annum,
except the president of the board, who may be voted a salary
not exceeding thirty thousand dollars per annum, which
salaries shall be fixed by said board of trustees. All salaries
and expenses connected with, or growing out of the trust,
shall be paid by the trustees from the trust fund.

19. The board of trustees shall have its principal office
in the city of New York, unless changed by vote of the
trustees, at which office or in some place of safe deposit in
said city, the bonds and stocks shall be kept. The trustees

326

STANDARD OIL TRUST

shall have power to adopt rules and regulations pertaining
to the meetings of the board, the election of officers and the
management of the trust.

20. The trustees shall render at each annual meeting,
a statement of the affairs of the trust. If a termination of
the trust be agreed upon as hereinafter provided, or within
a reasonable time prior to its termination by lapse of time,
the trustees shall furnish to the holders of the trust certifi-
cates a true and perfect inventory and appraisement of all
stocks and other property held in trust, and a statement of
the financial affairs of the various companies whose stocks
are held in trust.

21. This trust shall continue during the fives of the sur*
vivors and survivor of the trustees in tliis agreement named
and for twenty-one years thereafter; provided, however,
that if at any time after the expiration of ten years, two-
thirds of all the holders in value, or if after the expiration
of one year, ninety per cent, of all the holders in value of
trust certificates shall, at a meeting of holders of trust cer-
tificates called for that purpose, vote to terminate this
trust at some time to be by them then and there fixed, the
said trust shall terminate at the date so fixed. If the hold-
ers of trust certificates shall vote to terminate the trust
as aforesaid, they may, at the same meeting or at a sub-
sequent meeting called for that purpose, decide by a vote of
two-thirds in value of their number the mode in which the
affairs of the trust shall be wound up, and whether the trust
property shall be distributed or whether it shall be sold and
the values thereof distributed, or whether part, and if so,
what part, shall be divided and what part shall be sold, and
whether such sales shall be public or private. The trustees,
who shall continue to hold their offices for that purpose,
shall make the distribution in the mode directed, or, if no
mode be agreed upon by two-thirds in value as aforesaid,
the trustees shall make distribution of the trust property
according to law. But said distribution, however made,
and whether it be of property, or values, or of both, shall
be just and equitable, and such as to insure to each owner of
a trust certificate his due proportion of the trust property
or the value thereof.

22. If the trust shall be terminated by expiration of the
time for which it is created, the distribution of the trust

327

APPENDIX OF FORMS

property shall be directed and made in the mode above
provided.

23. This agreement, together with the registry of cer-
tificates, books of accounts, and other books and papers
connected with the business of said trust, shall be safely
kept at the principal office of said trustees.

(Signatures omitted.)

328

B

COPLEY SQUARE TRUST

(Williams v. Boston, 208 Mass. 497)
Underwriting Subscription Agreement

With Moses Williams, J. Morris Meredith, and John P. Rey-
nolds, Junior, and their successors, trustees under the Copley
Square Trust Agreement, a copy of which is attached hereto
marked "B," for shares of the Copley Square Trust,

In consideration of an underwriting commission of two
(2) per cent, to be paid to each subscriber on the amount
by him hereto underwritten and subscribed, — said com-
mission to be payable at the time of the payment by the
trustees to the Museum of Fine Arts of the first instalment
of the purchase money under their contracts for the pur-
chase of the Museum of Fine Arts property, copies of which
contracts are appended hereto, marked ''C" and ''D" re-
spectively, — and in order to enable said Trustees to enter
into and perform said contracts "C" and "D," each of the
parties who have set their names hereto hereby subscribes
for the number of shares set opposite his signature, but only
upon the following terms and subject to the following limi-
tations, namely: —

The total initial issue of shares is to be twenty thousand
(20,000) shares, of the par value of one hundred (100) dol-
lars each, and this agreement is to be operative and binding
only if said twenty thousand (20,000) shares are subscribed
hereunder. The shares are to be paid for in four instal-
ments, as follows : —

First instalment June 15th, 1902, thirty-five dollars per share
Second " June 15th, 1904, twenty-five " " __ "

Third " June 15th, 1906, " " " " " '

' Fourth " June 15th, 1907, 1908, or 1909,

as the Trustees may determine to be necessary
to enable them to make payment of the final in-
stalment of the purchase price under said con-
tracts ''C" and "D," fifteen dollars per share.
329

APPENDIX OF FORMS

Each subscriber agrees for himself and his representatives
to pay to the Trustees said first instalment of thirty-five
(35) per cent, due June 15, 1902, on the niunber of shares
by him subscribed hereunder. On the pajonent of said first
subscription instalment, scrip therefor denoting thirty-five
(35) per cent, paid will be issued by the Trustees. Said
scrip shall represent the interest of the holder in the shares
subscribed for by him and shall be transferable on the books
of the Trustees. All scrip issued shall refer on its face to this
agreement, and shall contain a stipulation that by accept-
ance thereof the holder accepts the provisions of this agree-
ment in relation thereto.

For pajmient of the subsequent subscription instalments
the Trustees shall call from time to time upon each scrip-
holder of record at the time the call is made by sending at
least ten (10) days' written notice by mail, postage prepaid
to his address on their books. Upon each such call, each
scrip-holder shall have the option either of paying with
respect to the shares for which he has scrip the subscription
instalment then called for pajnnent or of permittiDg his
scrip ownership and his interest in the shares represented
thereby to lapse.

If he duly meets the call, he shall on surrender of his old
scrip receive new scrip sho^^^ng the total percentage paid
up, and on payment of the call for the last instalment he
shall receive full paid certificates of shares under said trust
agreement.

Upon failure by any scrip-holder to pay any subscription
instalment, continued for thirty days after written notice
duly mailed to him as above provided, his scrip ownership
shall lapse, and thereupon the scrip then standing in his
name on the books of the Trustees shall vest in said Museum
of Fine Arts in accordance wth the "Agreement as to Lapse
of Scrip" appended hereto, which forms a part of this agree-
ment, and all sums already paid to the Trustees by any per-
son upon the shares represented by said scrip shall be for-
feited to the Trustees for the benefit of the Museiun as
owner of the lapsed scrip, and all right of the former scrip-
holder to the shares represented by such scrip shall cease
and become vested in said Museum.

All scrip when issued shall bear interest on the amount
paid up at the rate of four (4) per cent, per annum, payable

330

COPLEY SQUARE TRUST

semi-annually July 1st and January 1st until the last in-
stalment of the purchase price for said property bought
from said Museum of Fine Arts under said contracts "C"
and "D" has been paid.

It is intended that this agreement and said Trust Agree-
ment shall take effect simultaneously, and only in the event
that said Trustees shall execute said contracts "C" and
"D" with said Museum of Fine Arts.

Witness the signatures and common seal of the subscribers
this day of A.D. 1902.

Signatures. Number of Shares Address.

Approval and Acceptance by Trustees

The provisions of the foregoing underwriting subscription
agreement are hereby approved and the subscriptions there-
under are accepted, said contracts "C" and "D" with the
Museum of Fine Arts for the purchase of its property hav-
ing been executed simultaneously herewith.

(Signatures)
As Trustees of the Copley Square Trust,
But Not Individually.

"B"

Agreement as to Lapse of Scrip

As part of the transactions above set forth, and in con-
sideration thereof, said Trustees as Trustees of the Copley
Square Trust, but not individually, and said Museum of
Fine Arts agree with each other as follows: —

The Trustees agree to notify in writing the Museum of
every lapse of ownership of scrip under the terms of the
above underwriting subscription agreement, and to issue
to the Museum new scrip therefor upon satisfaction of the
default thereon as next provided. The Museum agrees that
it will within ten days after such notice at its option either
pay to the Trustees the subscription instalment in default
on such scrip or apply the amount of such subscription in-
stalment toward the payment of any instalment of the pur-
chase money then due, or, if none is due, upon the instal-

331

APPENDIX OF FORMS

ment next thereafter becoming due, interest to be adjusted;
and thereafter, as each successive subscription instalment
falls due, it will at its option, so pay the sum to the Trustees
or apply the same on said purchase money so long as it re-
mains the owner and holder of such scrip.

If, after due notice has been sent to the Museum, as above
provided, of a lapse of ownership to any scrip or calling for
the payment of any subscription instalments on such scrip
already belonging to the Museum, as in the foregoing under-
writing subscription agreement provided, the Museum neg-
lects for ten days to make such payment, the amount
unpaid on said scrip or the amount of the subscription instal-
ment so called for, as the case may be, shall, without further
acts of the parties, be applied as a partial payment on any
instalment of the purchase money then due, or, if none is
due, upon the instalment next thereafter becoming due,
interest to be adjusted.

Any lapsed scrip issued to the Museum shall be transfer-
able by the Museum, and, when transferred, shall again be
subject to the provisions of the original agreement appli-
cable to all scrip, and shall be taken to have been paid up to
the extent to which subscription instalments have been
either actually paid in cash or have been applied in partial
payments of instalments of purchase money as above pro-
vided.

The Trustees agree to warrant and defend the title of the
Museum to all lapsed scrip issued to it mider this agree-
ment, and to bear all the expense of defending said title,
and in case the holder of any lapsed scrip for which the
Trustees have issued new script to the Museum shall estab-
lish a title inconsistent with the title of the Museum to such
new scrip said Trustees agree to indemnify the Museum
against all loss thereby, including the payment of any sum
credited on the purchase money in respect to such scrip,
and the adjustment of interest.

In witness whereof the Trustees and the Museum of Fine
Arts have executc^d this instrument, and said Trustees have
affixed their seals and the Museum has affixed its seal hereto
this day of A.D. 1902, said Trustees under-
taking hereby only as Trustees of the Copley Square Trust,
l;ut n(jt individually.

332

COPLEY SQUARE TRUST

Copley Square Trust Agreement

Declaration of Trust made April . . . , 1902, establishing
the Copley Square Trust, for the purchase, development, and
disposition of a certain parcel of land with the buildings there-
on, situated in Boston, Suffolk County and Commonwealth of
Massachusetts, and bounded and described as follows : —

Description of Property. Northerly on the southerly
line of St. James Avenue as laid out and at present existing
by three lines, one a straight line measuring 25 feet, another
a curved line drawn with a radius of 198 25-100 feet, measur-
ing 221 25-100 feet, and the third another straight line
measuring 25 feet; westerly on the easterly line of Dart-
mouth Street, 350 feet; southerly on the northerly line of
Stuart Street, 260 feet; and easterly on the westerly line of
Trinity Place, 350 feet. Containing 95,268 square feet more
or less. Subject to the restrictions and provisions so far as
the same are now in force, imposed by an indenture between
the City of Boston and the Museum of Fine Arts, dated
October 26, 1899, and recorded with Suffolk Deeds, Libro
2642, Page 26, and by an Agreement contained in deed of
said City to said Museum of Fine Arts, dated September 15,
1899, recorded with said Deeds, Libro 2634, Page 396.

We Moses Williams of Brookline in the County of Nor-
folk in said Commonwealth, J. Morris Meredith of said
Boston, and John P. Reynolds, Junior, of Milton in said
County of Norfolk, hereinafter called the ''Trustees," be-
ing about to make — simultaneously with the execution
hereof — the contracts with the Museum of Fine Arts, a
Massachusetts Corporation, for the purchase of the prop-
erty above described, copies of which contracts are on file
with the Old Colony Trust Co. of Boston, declare that we
will, and our heirs, executors, administrators and assigns
shall, hold said contracts and said property when conveyed
to us and all monies and other property which may be re-
ceived by the Trustees hereunder on the following trusts for
the benefit of the holders from time to time of the scrip and
shares hereinafter described.

Title of Trustees. 1. The title of the Trustees here-
under shall be "Trustees of the Copley Square Trust," and

333

APPENDIX OF FORMS

this instniment may be referred to as the "Copley Square
Trust Agreement."

The word "Trustee" or "Trustees" wherever used in this
instrument shall be taken to mean the trustee or trustees for
the time being, howsoever appointed, except where it is
otherwise pro\'ided.

Gexer-\l Purposes. 2. The general purposes of the trust
are to make and carry out said contracts -u-ith the ^Museum of
Fine Arts for the purchase of the property above described, and
to manage and develop said property- as hereinafter pro%'ided.

Capital S2,000,000. 3. The beneficial mterest in the
trust shall be divided into equal shares, each representing
one hundred (100) dollars paid in. The Trustees shall issue
to the several persons beneficially interested certificates
stating the number of shares to the extent of which said per-
sons are interested, and amounting in the aggregate to the
total amount paid in by the beneficiaries. The total author-
ized issue shall be limited to twenty thousand (20,000) shares,
aggregating two million (2,000,000) dollars; and the num-
ber of shares shall not at any time be increased beyond said
twenty thousand (20,000) shares except pursuant to a vote
of the shareholders as hereinafter pro\'ided.

Form of Certificate. 4. The certificates of shares to be
issued by the Trustees shall be substantially in the follo'OTiig
form : —

"Certificate No .... Shares.

Copley Square Trust

" This is to certify that is the owner of ... .

of the equal shares of One Hundred Dollars each of the Cop-
ley Square Trust, under the Declaration of Trust b}- ]\Ioses
Williams, J. Morris Meredith, and John P. Reynolds, Junior,
dated April . . . , 1902 and recorded with Suffolk Deeds,
Book . . . . , Page .... By acceptance of this certificate the
holder accepts and becomes bound by the terms of said
Declaration of Trust.

"Said shares are transferable only by assignment duly
recorded on the books of the Trustees, upon surrender of
this certificate properl}- endorsed.

"Witness the signatures of the Trustees of said trust this

day of 19...

"Trustees of the Copley Square Trust."
334

COPLEY SQUARE TRUST

Transfer of Certificates. 5. The share certificates
and the scrip hereinafter provided for issued by the Trus-
tees shall be the muniments and evidence of the interest of
the shareholders hereunder. They shall be transferable
only on the books of the Trustees upon their surrender duly
endorsed or with the consent of the Trustees in some other
way given, and the acceptance of a certificate for shares or
scrip shall make the person therein named as shareholder or
scrip-holder bound by this instrument.

New Shares. 6. The shareholders may by vote at a
meeting duly called for the purpose increase from time to
time the number of shares to be issued hereunder by the
Trustees. The holders of such new shares shall be interested
hereunder equally with the holders of the shares first issued.
Such new shares shall not be issued for less than one hun-
dred dollars actually paid in cash, or its equivalent in the
judgment of the Trustees. In the issue of any such new
shares the right to subscribe shall (unless the Trustees shall
determine upon some other method as being more advan-
tageous for the trust) be offered pro rata to the then share-
holders.

Issue of Shares and Scrip. 7. The Trustees shall issue
the first twenty thousand shares, and all new shares author-
ized by the shareholders, from time to time as payment is
made for them under the terms of such subscription con-
tracts as shall to the Trustees seem proper for ensuring the
prompt payment of the subscriptions. The Trustees shall
issue scrip upon pajonent of the first subscription instal-
ments in such form and upon such terms as they deem proper
and thereafter upon payment of each succeeding subscription
instalment new scrip in place of that previously issued.

Underwriting of Subscriptions, Promotion, etc.. Ex-
penses. 8. The Trustees are empowered to procure under-
writing subscriptions for said twenty thousand shares, and
at the time of paying to the Museum of Fine Arts the first
instalme'nt of the purchase money under said contracts with
it for the purchase of said property, the Trustees shall pay
to each subscriber to the underwriting subscription agree-
ment for said twenty thousand shares two per cent, on the
amount of his subscription as an underwriting commission,
and shall also pay to Meredith & Grew of Boston — to be

335

APPENDIX OF FORMS

apportioned by them among themselves and others as already-
agreed upon — $30,000, as the entire compensation for
forming this Trust and raising the capital.

Payments to Museum. 9. Out of the monies which
come to them under this instrument the Trustees shall pay
the purchase price instalments required under said con-
tracts with said Museum of Fine Arts.

Powers of Trustees. 10. The Trustees shall have
power to pay for the services of counsel in the organization
of this trust, the preparation of this instrument, the exami-
nation of the title to the real estate above described, and
the general management of the trust; to pay the necessary
expenses of the management of the trust, including compen-
sations to such clerks, agents, and brokers as they deem
necessary, including, if in their judgment it be necessary or
wise, the payment of brokers' commissions for the market-
ing of any of the shares or scrip held by the underwriters or
by said Museum of Fine Arts, and such architects, engineers,
and other persons as they may think best for furnishing ad-
vice or plans for the development of the property above
described; to invest any monies in their hands in such
securities as are at the time permitted as investments to
trustees under the laws of Massachusetts and said securities
to sell or pledge at any time on such terms and for such con-
siderations as seem to them proper. They shall have full
power to make any agreements and any expenditures they
may think advisable in connection with the straightening
or altering of the boundary lines of said property and the
removal of restrictions on the premises. The Trustees shall
have full power — in addition to the powers enumerated
above — to proceed in their discretion and at any time or
times with the development of the property in the manner
which may be, in their opinion, best calculated to advance
the interests of the shareholders, and to that end the Trustees
shall have power to sell, mortgage, and lease the property in
whole or in part on such terms as to them shall seem proper,
including the right to mortgage the property to secure part
of the purchase money as provided in their contract with
the Museum of Fine Arts, and no purchaser from them shall
be bound to see to the appli(!ation of the purchase money;
to borrow money, giving therefor their notes as Trustees
with or without collateral; to contract as Trustees for the

33G

COPLEY SQUARE TRUST

erection upon the premises of such buildings as seem to
them proper; to acquire for the benefit of the trust and on
such terms as seem to them proper the shares or other securi-
ties in any corporations or associations which may be or-
ganized for the purpose of developing any part of the prop-
erty; to make from time to time distributions on account
of capital, and at any time in their discretion to liquidate
and wind up the trust and distribute the net proceeds among
the shareholders of record. It is, however, expressly stipu-
lated that before engaging in any plan which will, in their
judgment, require additional capital, the Trustees shall at
a meeting of the shareholders as herein provided obtain
authority to issue the further shares necessary to raise such
additional capital.

Compensation of Trustees. 11. Until said completion
of the purchase of said property, the Trustees shall receive
as compensation for their services fifteen hundred (1500)
dollars per annum for each Trustee, in addition to the usual
five per cent, commission (to be divided among the three)
on the income of the monies invested by them (including as
income all interest paid by the Museum of Fine Arts on the
instalment payments of the purchase price under said con-
tracts with it), and thereafter the compensation of each
Trustee shall be fifteen hundred dollars per armum, or one-
third of five per cent, on the trust income, whichever is the
larger. Should the Trustees erect any buildings on the land
of said trust, they are to receive two per cent., to be divided
among them, on the total cost of any such buildings for their
services in supervising the designing of the plans for the
same and the construction.

Dividends. 12. Until the purchase of said property
from the Museum of Fine Arts under said contract appended
hereto has been completed by the delivery of deed and pos-
session as in said contract provided, the Trustees shall pay
dividends or interest on the shares and scrip from time to
time outstanding at the rate of four per cent, per annum,
on the amounts from time to time paid up thereon, payable
semi-annually, July 1st and January 1st; and all such pay-
ments and also all other payments made prior to the com-
pletion of said purchase in excess of the income actually
received shall be considered a part of the cost of said property.

337

APPENDIX OF FORMS

After said purchase has been completed, the Trustees
shall from time to time declare and pay such di\'idends out
of income as seem to them proper; and the Trustees shall
have full power to determine what is income and what is
principal,

Li^nxATioxs ox Trustees' Powers. 13. The Trustees
shall have no power to bind the shareholders personally,
and in ever}' written contract into which the}^ shall enter
reference shall be made to this Declaration of Trust; and
the party contracting with the Trustees shall look only to
the funds and property of the trust for the pa\Tnent of any
liabilitj' and obligation under the contract, and neither the
Trustees nor the shareholders, present or future, under this
instrument, shall be personally liable therefor.

Reser^'e Fuxd. 14. The Trustees may establish a re-
serve fund for future contingencies, and for that purpose may
set aside and invest annually such sum as to them seems
proper out of the income; and such reserv'e fund thej' may
in their discretion distribute in whole or part as income at
any later time.

Trustees' Accounts. 15. The Trustees shall keep or
cause to be kept proper books which shall at all reasonable
times be open to inspection by smy shareholder. They shall
each year make a financial report to the shareholders.

Resignation, Removal, and Appointment of Trus-
tees. 16. Any Trustee maj^ by written instrument signed,
acknowledged, and recorded in the Suffolk County Registry
of Deeds, resign his office.

Any vacancy in the number of Trustees may be filled by
the remaining Trustees by a written instrument signed, ac-
knowledged, and recorded as aforesaid, and such appoint-
ment shall be final unless and until revoked b}^ the vote of
the shareholders. A Trustee so appointed shall have all
the powers and duties of his predecessor. The acting Trus-
tees for the time being, whether sur\'i\'ing or remaining,
shall have all the powers and discretions of the original
Trustees. Upon resignation, decease, incapacity, removal,
or vacancy for any cause, the title of the outgoing Trustee
shall vesl in the remaining Trustees, and upon the filling
of any vacancy the title to the whole trust property shall
vest jointly in those who shall then be Trustees hereunder.

338

COPLEY SQUARE TRUST

The Trustees shall be responsible only for wilful breach of
trust; and no Trustee shall be liable for allowing one or
more of their number to have possession of the trust books
or to make collections, or to have the sole custody of the
trust monies, and no Trustee shall be responsible except for
his own acts. No bond or surety or sureties shall ever be
required of any trustee acting hereunder.

When any Trustee is absent from said Commonwealth or
unable to perform his duties or has died, the remaining
Trustees or Trustee shall have the power to act; and the
certificates of the remaining Trustees or Trustee as to such
absence, disability, or death shall be conclusive upon all
parties in interest.

Nature of Shareholders' Interest. 17. No title or
estate in any property at any time held by the Trustees
hereunder is to vest in the shareholders, but the same shall
be and remain in said Trustees, their successors and assigns.
The sole interest of each shareholder shall be in the obliga-
tion of the Trustees to hold, manage, and dispose of said
property and to account for its income and proceeds as in
this instrument provided.

Death of Shareholder. 18. The death of any share-
holder shall not terminate the trust nor entitle his legal
representatives to claim an account, except as hereinbefore
provided, or to take any action in court for a partition or
winding up or otherwise against the Trustees; but the ex-
ecutors, administrators, or assigns of the decedent shall
succeed to all the rights of the decedent under this instru-
ment upon producing his certificate.

Meetings of Shareholders. 19. The Trustees may,
whenever they see fit, call meetings of the shareholders ; and
they shall do so upon the written request of the holder or
holders of at least one-tenth of the shares outstanding. Notices
of meetings shall be given by the Trustees at least five days in
advance by mailing postage prepaid a copy to each share-
holder to the last address furnished by him to the Trustees,
or in default thereof to his last known residence or place of
business. Shareholders may attend and vote in person or
by proxy, and each share shall be entitled to one vote. A
majority in amount of the shareholders shall constitute a
quorum. Until all subscription instalments have been called

339

APPENDIX OF FORMS

for pa\T3ieiit the holders of scrip from time to time outstand-
ing who are not in default as to any instalment shall have
all the rights of shareholders under this instrument. And the
words shareholder and shareholders shall include such scrip-
holders, wherever used in this instrument, unless the con-
text makes such meaning impossible.

Instructions and Amendments by Shareholders.
20. By a vote of a majority in value of the shares
outstanding, the shareholders may from time to time au-
thorize or instruct the Trustees in any manner, may
remove any Trustee and appoint another in his place with
the same effect as provided in Article 16 and may alter
or amend this Declaration of Trust, but not so as to subject
the Trustees or shareholders to any personal liability
or to affect the previously acquired rights hereunder of
any person other than the Trustees or shareholders. No
such action, and no removal or appointment of Trustees,
shall affect any person other than the Trustees or share-
holders, not having actual notice thereof, until recorded in
the Suffolk Count}^ Registry of Deeds.

Recording New Matter. 21, Any paper signed by the
Trustees and a copy of the record of any of the proceedings
of the shareholders, certified by the Trustees, which it may
be deemed desirable to record in the Registry of Deeds, may
be acknowledged by any one of the Trustees, in the manner
prescribed for the acknowledgment of deeds; and such paper
or copy duly recorded shall be conclusive evidence of the
facts therein stated and of the regularity of the meeting.

Winding Up by Vote. 22. Whenever three-fourths in
value of the shareholders shall in writing or by vote so direct,
the Trustees shall liquidate and %vind up the trust and dis-
tribute the proceeds among the shareholders or shall con-
vey the trust property as by such writing or vote directed,
and thereupon the Trustees shall be under no further liability.

Winding up by Limitations. 23. This trust shall, un-
less sooner terminated as above provided, continue for
twenty years after the death of the last survivor of the fol-
lowing persons: —

Moses Williams, Junior, Hugh Williams, Mary E. Wil-
liams, (Constance M. Williams, and Gladys Williams, chil-
dren of said Moses Williams; Frederick C. Bowditch, Junior,

340

COPLEY SQUARE TRUST

Edward F. Bowditch, and Elizabeth H. Bowditch, children
of Frederick C. Bowditch, of said Brookline; Priscilla M.
Reynolds and John P. Reynolds, 3d, children of said John
P. Reynolds, Junior; Thomas Gorham, son of Robert S.
Gorham, of Newton, in the County of Middlesex and said
Commonwealth; and Elliott Perkins, son of Thomas Nel-
son Perkins, of Westwood, in said County of Norfolk.

In Witness Whereof we, the said Trustees, have here-
unto set out hands and common seal on the day and year
first above written.

Commonwealth op Massachusetts)

Suffolk | ^^- ' a.d. 1902.

Then personally appeared the above named Moses Wil-
liams, J. Morris Meredith, and John P. Reynolds, Junior,
and acknowledged the foregoing instrument to be their
free act and deed as trustees as aforesaid.
Before me

Justice of the Peace.

341

c

PARK SQUARE REAL ESTATE TRUST

(Williams v. Johnson, 208 Mass. 544; WiUiams v. Boston, 208 Mass.
497; Williams v. Milton, 215 Mass. 1)

This Declaration of Trust, made this fifteenth day of
September m the year one thousand nine hundred and
nine.

WITNESSETH

Whereas the New York, New Haven & Hartford
Railroad Company, a corporation duly organized under
the laws of the Commonwealth of Massachusetts, has con-
veyed to Moses Williams of Brookline, Amory A. Lawrence,
Alfred Bowditch and Laurence Minot of Boston, all of the
Commonwealth of Massachusetts, by deed of even date and
to be recorded herewith, certain real estate in the City of
Boston, particularl}^ described in said deed, reference to
which is hereby made, to be held by them upon the trusts
hereinafter set forth.

Now, THEREFORE, we, the said Moses Williams, Amory
A. Lawrence, Alfred Bowditch and Laurence Minot,
do hereby declare said trusts as follows :

1. The trustees shall forthwith issue certificates in sub-
stantially the form hereinafter set forth for fifty-two thou-
sand shares of the nominal par value of one hundred dollars
each, to the said New York, New Haven & Hartford
Railroad Company, in payment for the real estate this
day conveyed to them. The entire interest of the cestuis
que irustent, or shareholders, in the property held or to be
held by the trustees is represented at this date by said
fifty-two thousand shares to be issued as above provided.
The trustees may issue certificates in substantially the form
hereinafter set forth for not exceeding forty thousand addi-
ti(jnal shares of the nominal par value of one hundred dollars
each, in exchange for convertible notes or bonds, as herein-
after provided.

342

PARK SQUARE REAL ESTATE TRUST

Form of Certificate
No Shares.

The Trustees of the
Park Square Real Estate Trust

under a Declaration of Trust dated September 15, 1909,
and recorded in Suffolk County Registry of Deeds, libro
page.. ..

Hereby declare that

of is the owner of shares

of the nominal par value of one hundred dollars each under
said Declaration of Trust.

The shares represented by this certificate may be trans-
ferred on the books of the said trustees in accordance with
the provisions of said Declaration of Trust.

Witness our hands this day of

A.D

■ Trustees.

2. The said shareholders are not to have any legal title
to the trust property itself, real or personal, held from time
to time by the trustees, and, in especial, they shall have no
right to call for any partition; they shall have no equitable
estate in the lands and appurtenances thereto belonging
constituting the trust property, but their interest shall
consist only of an interest in the money to arise from the
sale or other disposition thereof by the trustees, as herein
provided, and of the rights herein mentioned previously
to such sale, and the shares shall be personal property carry-
ing the rights, as herein set forth, of division of proceeds
and profits and the other rights and matters concerning
the trust property, and shall be transmissible and trans-
ferable as personal estate.

3. The death of a shareholder during the continuance
of this trust shall not operate to determine the trust, nor
shall it entitle the legal representatives of a deceased share-
holder to an account, to take any action in the courts, or
otherwise, against the trust or the trustees; but the execu-

343

APPENDIX OF FORMS

tors, administrators or assigns of the deceased shall succeed
to all rights of said deceased under this trust upon the sur-
render of the certificate of such shares.

4. The trustees may, from time to time, at their discre-
tion, invite and receive subscriptions to additional shares
at the price of not less than one hundred dollars each for
the purpose of increasing the capital of the trust, giving
preference, upon such terms and conditions as they shall
deem best, to existing shareholders and to the holders of
convertible notes or bonds. All subscriptions shall be sub-
ject to the terms of this Declaration of Trust.

5. The trustees shall issue certificates in substantially the
form hereinbefore set forth for each sum of one hundred dol-
lars, or for multiples thereof, paid to them for the purchase
of additional shares; but no certificate except those to be
forthwith issued hereunder in payment for the real estate
this day conveyed to the trustees and except those issued and
used for exchange for convertible notes or bonds as herein
elsewhere provided, shall be issued for any less sum than one
hundred dollars; and no certificate shall be issued hereunder
until a record thereof has been made in the books of the
trustees.

6. Shares may be transferred on the books of said trustees
by the person named in the certificate thereof, his attorney
or legal representative, upon the surrender of the certifi-
cate, and a new certificate shall be issued to the transferee,
who shall thereupon become subject to the terms of this
Declaration of Trust.

All transfers of shares shall be recorded in the books of the
trustees.

The words "shareholder" and ''shareholders," wherever
used herein, shall be construed to mean those who are for
the time being recorded as such on the books of the trustees,
and only to such shall the trustees be responsible.

7. No assessment shall ever be made upon the sharehold-
ers.

8. The books of said trustees shall always be open to the
inspection of shareholders.

9. The truste(^s shall have no power to bind the share-
holders personally and all persons or corporations extending
credit to, contracting with or having any claim against the
trustees, shall look only to the funds and property of the

344

PARK SQUARE REAL ESTATE TRUST

trust for payment under such contract or claim, or for the
payment of any debt, damage, judgment or decree, or of
any money that may otherwise become due or payable to
them from the trustees, so that neither the trustees nor the
shareholders, present or future, shall be personally liable
therefor. In every written order, contract or obligation
which the trustees shall give or enter into, it shall be the
duty of the trustees to refer to this declaration and to stipu-
late that neither the trustees nor the shareholders shall be
held to any personal liability under or by reason of such
order, contract or obligation.

10. The trustees shall have the absolute control over and
disposal of all real estate and other property held by them
at any time under this trust, including the power to im-
prove the real estate at any time held by them by building
thereon or otherwise, to sell for cash or credit at public or
private sale, and to take back mortgages to secure the
whole or any part of the purchase price of any real estate
sold by them, and to assign and discharge such mortgages,
to mortgage with or without power of sale, to lease or hire
for improvement or otherwise for a term beyond the possi-
ble termination of this trust, or for any less term, to let, to
exchange, to release and to partition.

They may represent the shareholders and the trust in all
suits or legal proceedings relating to the trust estate in any
courts of law or equity, or before other bodies or tribunals,
may employ counsel and commence suits or proceedings,
or compromise, or submit to arbitration, all matters of dis-
pute to which the trust or the trustees may be a party, when
in their judgment considered necessary or proper.

11. The trustees shall have power to borrow money from
time to time to carry out the purposes of this trust, and the
decision of the trustees as to what constitute such purposes
shall be final, and to issue their promissory notes or bonds,
as trustees hereunder, for money so borrowed, and to secure
the repayment of any money borrowed by a pledge, mort-
gage or hypothecation of the trust property or of any part
thereof, provided, however, that no trustee nor any share-
holder hereunder shall be personally liable for any money
so borrowed, and that in every promissory note, bond and
other obligation issued by the trustees hereunder, they shall
refer to this declaration and stipulate against personal lia-

345

APPENDIX OF FORMS

bility, both of the trustees and of the shareholders, as here-
inbefore in paragraph 9 hereof set forth. The total in-
debtedness of the trustees for money borrowed shall not at
any one time exceed the principal sum of four million dol-
lars ($4,000,000). No lender of money to the trustees shall
be bound to inquire as to the indebtedness of the trustees
to any other person or persons, nor shall any such lender or
purchaser be liable for the application of money loaned or
of purchase money.

12. The trustees may from time to time issue their notes
or bonds to an amount not exceeding four million dollars,
bearing interest at a rate not exceeding four per centum per
annum, secured by mortgage of the whole or any part of the
trust property, and convertible into shares of this trust on
any interest day prior to the second day of July, in the year
one thousand nine hundred and nineteen, on the basis of
ten shares of the nominal par value of one hundred dollars
each for each one thousand dollars par value of such notes
or bonds, ex coupon due on day of conversion, and they may
secure by the same mortgage one or more series of converti-
ble notes or bonds and one or more series of non-convertible
notes or bonds. The face value of any notes or bonds issued
under this section of this instrument shall be reckoned as a
part of the total sum which the trustees have hereinbefore
been authorized to borrow.

13. The trustees may acquire by purchase or otherwise
any real estate, or any interest therein, in the general
vicinity of that this day conveyed to them (and the judg-
ment of the trustees as to what constitutes general vicinity
shall be final), and any notes, bonds, shares or other securi-
ties of any corporation, association or real estate trust,
organized or adapted for the purpose of acquiring, holding,
managing or improving real estate, or for the purpose of
conducting a lighting, heating, power or other business
directly related to the management of real estate, if in their
judgment such acquisition will in any manner tend to
facilitate the laying out, developing, management or im-
provement of the real estate this day conveyed to them.
The trustees may lay out and construct or discontinue any
streets or ways upon any property at any time held by them.
The trustees may dedicate to any public use, or convey to
the city of Boston, with or without compensation therefor,

340

PARK SQUARE REAL ESTATE TRUST

such part or parts of any property at any time held by them
as, in their judgment, will enhance the value of their re-
maining property (any property which may have been sold
with an agreement for such dedication or conveyance being
deemed a part of such remaining property for this purpose)
to a degree equal to or greater than the value of the part or
parts thereof so dedicated or conveyed (and the judgment
of the trustees as to the extent of such enhancement shall
be final and shall be conclusively evidenced by any act of
dedication to any pubhc use or any deed of conveyance to
said city of Boston). The trustees may contribute money
or other property to the cost of any public or quasi public
undertaking, which in their judgment will be advantageous
to the trust property. The powers given the trustees in
this section of this instrument shall be construed as given
in addition to any powers given them elsewhere, and the
judgment of the trustees, if exercised in good faith, shall be
final.

14. Any real estate, or any interest therein, acquired by
the trustees after the delivery of this instrument, may be
conveyed to them in joint tenancy as trustees hereunder, or
may be conveyed to any one or more of them as individuals,
or to any other person or persons for their benefit, but on
or before the first day of April in the year one thousand nine
hundred and twelve the trustees shall cause to be conveyed
to them in joint tenancy as trustees hereunder all real estate
then owned by them, and all real estate thereafter acquired
shall be conveyed to them in joint tenancy as trustees
hereunder.

15. Any notice to any subscriber hereto or to any share-
holder of any meeting, assessment, dividend, or of any other
matter or thing which may be required under the provisions
of this instrument, or which may be deemed by the trustees
necessary or desirable, or which may be ordered in any
judicial proceedings, shall be deemed sufficient and binding
if a written or printed copy of such notice shall be delivered
personally, or mailed, with prepayment of postage, to such
subscriber or shareholder, or to his attorney designated for
the purpose, at the residence given on his subscription or
stated in his certificate, or to the address given by him from
time to time to said trustees, ten days prior to the date fixed
for such meeting, for the payment of such assessment, or

347

APPENDIX OF FORMS

dividend, or for the happening of any other matter, thing
or event, of which such notice is given.

16. The trustees may from time to time in their discre-
tion determine which of their receipts and expenditures shall
be treated as capital and which as income, and in making
such determination they shall be guided by their judgment
as business men, ha\'ing regard to the character and develop-
ment of the trust property, rather than bj' any strict rule
of law, and their determination shall be final. They may
divide the whole or any part of the net income of the prop-
erty held by them under this trust among the shareholders
annually or oftener in their discretion, and in any fiscal year
in which the net income of the trust property exceeds two
per centum of the par value of the average number of shares
outstanding during such fiscal year they shall divide at least
three-fourths of the net income. The decision of the trustees
as to what constitutes net income shall be final. The trus-
tees may set aside for a reserve or contmgent fund or use for
the improvement of the trust property anj' net income not
di\4ded as above provided.

17. Any reserve or contingent fund and any money await-
ing investment, or temporarily not required for the purposes
of the trust, may be put at interest or invested and rein-
vested in income-jaelding securities by the trustees at their
discretion.

18. The trustees may from time to time hire suitable
offices for the transaction of the business of the trust, ap-
point such oflacers and agents as they maj- think best, fix
their compensation and define their duties.

The compensation of the trustees with respect to income
shall not at any time exceed five per centum of the income
of the property held by them.

The compensation of the trustees with respect to capital
shall not at any time exceed three per centum of anj^ sums
expended by them for the development and improvement,
by the erection of buildings or otherwise, of the trust prop-
erty, and of the value of any property sold by them.

19. Any trustee under this instrument may resign his
trust Ijy a written instrument signed by him and acknowl-
edged in the manner required for the acknowledgment of
deeds; and such instrument shall be recorded in the Registry
of Deeds for the County of Suffolk and Commonwealth of

348

PARK SQUARE REAL ESTATE TRUST

Massachusetts. When any vacancy occurs at any time in
the office of trustee all property in the trust shall vest in the
remaining trustees or trustee, and such vacancy shall be
filled by the remaining trustees or trustee by an instrument
in writing acknowledged and recorded as aforesaid, and the
title to all the property of the trust shall vest in any new
trustee and the other trustees, and such new trustee shall
have the same powers as if originally named herein.

The trustees may, from time to time, by a written in-
strument signed by them and acknowledged in the manner
required for the acknowledgment of deeds and recorded in
the Registry of Deeds for Suffolk County, authorize any two
of their number to exercise any or all of the powers here-
under, and such authority may be so given to any two trus-
tees hereunder by name, or to any two of the persons who
may at any time be lawfully acting as trustees hereunder,
without naming them. When any trustee is absent from
the Commonwealth of Massachusetts, or incapable by
reason of illness or otherwise, the other trustees shall have
all the powers hereunder; and any trustee may by power of
attorney delegate his powers, for a period not exceeding six
months at any one time, to any other trustee or trustees
hereunder, provided that in no case shall less than two
trustees actually exercise the powers hereunder except as
aforesaid. The term 'Hhe trustees" wherever used herein
shall be deemed to mean those who are or may be trustees
for the time being. No trustee shall be required to give a
bond.

20. No trustee hereunder shall be responsible except for
his own wilful default. The trustees shall not be responsible
for the act, omission or default of any agent, if they have
used reasonable care in the selection of such agent. The
trustees may pay out of the trust fund all sums of money
to the payment of which they or either of them, by reason
of being trustees hereunder, may be held liable or subjected
by way of damages, penalty or fine.

21. At and upon the expiration of twenty years after the
death of the last survivor of the following-named persons,
Moses Williams, Amory A. Lawrence, Alfred Bowditch,
Laurence Minot, being the original trustees hereunder,
Moses Williams, 3d, and Alexander Whiteside Williams,
sons of Moses Williams, Jr., of Needham, William Minot

349

APPENDIX OF FORMS

and Sedgwick Minot, sons of William Minot, late of Boston,
deceased, and John S. Lawrence, son of said Amory A.
LawTence, or at such earlier time, not earlier than the second
day of July in the year one thousand nine hundred and
nineteen, as three-fourths in value of the shareholders may,
by an instrument in writing, signed and acknowledged in
the manner prescribed for the acknowledgment of deeds,
and recorded in the office of the Registry of Deeds for said
Suffolk County, appoint, said trustees shall terminate this
trust by selling, as soon as feasible in their judgment, all
property then held by them as such, and dividing the pro-
ceeds among the shareholders.

Provided, however, that upon the request of three-
fourths in value of the shareholders in writing, signed, ac-
knowledged and recorded as above provided, and made not
earlier than the second day of July in the year one thousand
nine hundred and nineteen, said trustees may, if it seems
to them judicious so to do, convey the trust property to
new or other trustees, or to a corporation, according to the
terms of such request, and in the manner stated therein,
being first duly indeimiified for any outstanding obligation;
and said trustees, upon filing in the Registry of Deeds for
said Suffolk County a certificate that they have complied
wdth such request, shall be under no further obligation.

Provided, however, and it is especially understood and
agreed that nothing in this clause contained shall be con-
strued as making it obligatory upon the trustees to comply
with such request to convey.

22. Meetings of the shareholders may be called by any
one of the trustees and shall be called upon the written re-
quest of five or more shareholders. Additional powers may
be created in the trustees at any meeting of the shareholders
by vote or resolution of the holders of at least two-thirds
of the shares then outstanding; provided that notice of the
proposed addition to such powers shall have been given in
the call for the meeting and that the same is not inconsistent
with the acquired rights of third parties. All recitals of
fact in any instrument in writing, signed and sealed by the
trustees and acknowledged by one or more of them, and
recordefl in tlu; Registry of Deeds for the County of Suffolk,
shall b(! conclusive evidence of all facts so recited in favor
of all persons dealing with the trustees.

350

PARK SQUARE REAL ESTATE TRUST

23, At all meetings of shareholders each share shall be en-
titled to one vote, and absent shareholders may vote by
proxy authorized by a writing dated and executed within
six months previous to the meeting at which it is used.

24. The trustees or any of them, in their individual capac-
ity, or in any other fiduciary capacity, acting alone or in
conjunction with others, may purchase and hold any shares
issued hereunder and also may subscribe for and purchase
on the terms offered to third persons generally, any notes
or bonds convertible or otherwise authorized or issued by
the trustees, and may purchase at public auction any real
estate or any interest therein offered for sale by the trustees,
and may purchase at private sale on any terms approved
by the vote of three-fourths in value of the registered share-
holders passed at any meeting called for that purpose, such
terms being stated in the call for such meeting, any real
estate or any interest therein offered for sale by the trustees.

In Witness Whereof we have hereunto set our hands and
seals this fifteenth day of September in the year one thou-
sand nine hundred and nine.

Moses Williams (Seal)

Amory a, Lawrence (Seal)

Alfred Bowditch (Seal)

Laurence Minot (Seal)

Commonwealth op Massachusetts "1

County of Suffolk j ' ' Boston, October 21, 1909.

Then personally appeared the above-named Laurence
Minot, and acknowledged the foregoing instrument to be
his free act and deed, Before me,

Charles S. Rackemann,

Justice of the Peace.
Boston, December 24, 1909.
at 3 o'clock and 39 minutes p.m.
Received and Entered with Sufifolk
Deeds, Libro 3418, Page 504.

Attest :

William T. A. Fitzgerald,
Registrar.

351

D

BOSTON PERSONAL PROPERTY TRUST

(Williams v. Milton, 215 Mass. 1)

This Declaration of Trust, made this tenth day of
Januar}^, in the year eighteen hundred and ninety-three,
by John Quiney Adams of Quincy, Moses Wilhams of Brook-
line, WiUiam Minot, Jr., and Abbott Lawrence Lowell, both
of Boston, and Robert Sedgwick Minot of Manchester, all
in the Commonwealth of Massachusetts (hereinafter called
the Trustees), witnesseth:

Designation

First. That this trust shall be designated the "Boston
Personal Property Trust."

I. TRUSTEES' DUTIES, POWERS AND LIABILITIES

Declaration, not a Partnership, Cestuis not Liable

Second. That the said Trustee shall hold all the funds
and property (hereinafter called the trust fund), now or
hereafter held by or paid to, or transferred or conveyed to
them or their successors as Trustees hereunder in trust for
the purposes, with the powers and subject to the limitations
hereinafter declared, for the benefit of the cestuis que trustent,
and it is hereby expressly declared that a trust, and not a
partnership, is hereby created; that neither the trustees nor
the cestuis que trustent shall ever be personally liable here-
under as partners or otherwise, but that for all debts the
trustees shall be liable as such to the extent of the trust fund
only. In all contracts or instruments creating liability, it
shall be expr(!ssly stipulated that the cestuis que trustent
shall not be liable.

352

BOSTON PERSONAL PROPERTY TRUST

Payments

Third. In case any person proposes to pay by instalments,
or at a future date, sums of money for interests in the trust
fund, the trustees shall have full power and discretion to
call such payments upon such terms and conditions as they
see fit, and to receive the same either wholly or partly in
cash, or in any property in which they are authorized to
invest said fund.

Power of Investment, Personal Property, Ground

Rents

Fourth, (a) The Trustees shall have as full power and
discretion, as if absolute owners, to invest and reinvest the
trust fund (including any surplus and also income) in per-
sonal property, including bonds and notes or obligations
secured upon real estate, and the decision of the Trustees as
to what is personal property shall be final. They shall have
the like power of investment in the purchase and improve-
ment of real estate in the cities of the United States of
America, for the purpose of leasing the same upon long terms,
or ground rents so-called; and all real estate so purchased
shall be conveyed to them in joint tenancy as Trustees
hereunder.

Power of Sale

(6) The Trustees shall have full power and discretion to
sell, transfer, and convey from time to time, at public or
private sale, any part or all of said trust fund, upon such
terms and conditions as they see fit, and to invest the pro-
ceeds in the same manner, and upon the same trusts as the
original fund.

Powers as to Real Estate

(c) The Trustees shall have absolute control over and
power to dispose of all real estate held by them at any time
under this Trust, as if they were the absolute owners thereof,
including the power to sell and convey, as above set forth, to
improve, to lease or hire for improvement or otherwise, for
a term beyond the possible termination of this trust, or for
any less term, either with or without option of purchase, to
let, to exchange, to release, and to partition.

353

APPENDIX OF FORMS

Power to Borrow and Mortgage

(d) The Trustees may borrow money, for such time and
upon such terms as they see fit, on mortgage of any real
estate held by them hereunder, and may give mortgages
therefor, either with or without power of sale, but never for
more than sixty per cent, of the value, in their judgment,
of the property so mortgaged.

Power to Borrow and Pledge

(e) The Trustees shall also have power at any time to
borrow money, and to pledge, as collateral security for such
loan, any personal property belonging to the trust fund,
provided, however, that no loan shall be contracted for,
so that the aggregate amount of such loans outstanding shall
at such time exceed, in the judgment of the Trustees, twenty-
five per cent, of the total amount of the personal property
of the trust fund.

Execution of Instruments

(/) The execution of all contracts, of all conveyances and
transfers, and of all other instruments relating to the trust
fund or any part thereof, by any three Trustees, shall al-
ways be sufficient. The acting Trustee or Actuary or Treas-
urer shall have full power to cancel and .discharge mort-
gages, by deed or otherwise, on the payment or satisfaction
thereof.

Purchasers, etc.. Not Liable

(g) No purchaser, lender, corporation, association or
officer or transfer agent thereof, dealing with the Trustees,
shall be bound to make any inquiry concerning the validity
of any sale, pledge, mortgage, loan, or purchase purporting
to be made by the Trustees, or be liable for the application
of money paid or loaned.

Records, Depositary

Fifth. The Trustees shall constitute as their Depositary
such trust company in the city of Boston as they shall from
tim(; to time select, and iiereby declare that tiiey have se-
lected for such Depositary the State Street Safe Deposit
& Trust Company. Such Depositary shall have the cus-

3.54

BOSTON PERSONAL PROPERTY TRUST

tody of this declaration of trust, of any and all instruments
altering or adding to the same, or terminating the trust, or
containing the resignation of one or more Trustees, or ap-
pointing one or more Trustees to fill vacancies, or ap-
pointing a Trustee attorney for a co-Trustee, or otherwise
affecting this declaration of trust, or the duties, powers, or
liabilities of the Trustees. Such Depositary shall be bound
to deliver on demand to any new Depositary selected by the
Trustees, all such documents and records, and also to record,
at the request of the Trustees, any such document in any
place of public record selected by them, whereupon the duty
of such Depositary as to such recorded document, and its
liability therefor hereunder, shall cease, and it shall deliver
to the Trustees all papers relating to the same. Copies of
all documents and records in the custody of such Depositary,
duly certified, and certificates as to who are the Trustees, or
cestuis que trustent, or the like, duly signed by the President,
Treasurer, or Actuary of such Depositary, shall be conclu-
sive upon all questions as to title or affecting the rights of
third persons, and in general shall have all the effect of their
originals.

Management and Compensation

Sixth. The Trustees may from time to time hire suitable
offices for the transaction of the business of the Trust, ap-
point, remove, or reappoint such officers or agents (including
a Depositary, and also agents to procure proposals for pay-
ments for interests herein) as they may think best, define
their duties, and fix their compensation. The compensation
of the Trustees shall not at any time exceed five per cent,
of the gross income of the Trust Fund, and one per cent,
of the amount distributed or conveyed upon final distribution
or conveyance.

Dividends, Surplus

Seventh. The Trustees shall declare dividends from the
net income of the Trust Fund among the cestuis que trustent
quarterly, or oftener, if convenient to the Trustees, and their
decision as to amount of dividends, and as to using therefor
any portion of the surplus fund, shall be final. They may
set aside from time to time such portion of the net income
as shall not be required for dividends for a surplus fund.

355

APPENDIX OF FORMS

Power to Decide Between Income and Capital

Eighth. The Trustees may charge all brokers' and agents'
commissions to Income or Capital, as they see fit. Thej'
shall have the right to treat as income such portion of the
price of stock bought or sold between di\'idend days as
fairly represents accrued dividends reckoned by way of
interest, but never at a higher rate than six per cent, per
annum on the price paid or received. In general their de-
cision as to what constitutes Capital or Income, or shall be
credited or debited to Capital or Income, shall be final.

Annual Account

Ninth. The Trustees shall render an account annually
or oftener, if convenient to them, and shall, upon request,
deliver or mail a copy to each cestui que trust.

Resignation. Vacancy, New Appointment, TEirpoiLVRY
Absence, Power of ATTORNTiT

Tenth. Any Trustee may resign his trust by a written
instrument signed and sealed by him, and acknowledged in
the maimer prescribed for the acknowledgment of deeds,
and such instrument may be recorded in the Registry
of Deeds for the County of Suffolk, or deposited with
such Depositary as the Trustees shall from time to time
select.

Any vacancy occurring from an}^ cause at any time in the
number of said Trustees shall be filled by the remaining
Trustees. Until such vacancy' is filled, or while any Trustee
is absent from the Commonwealth of ^Massachusetts, or
phj'sically or mentally mcapable, by reason of disease or
otherwise, the other Trustees shall have all the powers here-
under, and the certificate of the other Trustees of such va-
cancy, absence, or incapacity' shall be conclusive. In case
of such vacancy or of appointment of a new Trustee or
Trustees, the Trust Fund shaU unmediately vest in the re-
maining Trustees or in the new Trustee or Trustees, jointly
with the remaining Trustees, as the case may be. And any
Trustee may, by power of attorney, delegate liis powers,
for a period not exceeding sLx months at any one time, to
any other Trustee or Trustees hereunder, provided that in
no ease shall less than three Trustees personally exercise

356

BOSTON PERSONAL PROPERTY TRUST

the other powers hereunder (except in case of discharge of
mortgages, as hereinbefore provided).

The term "Trustees" used in this agreement shall be
deemed to mean those who are or may be Trustees for the
time being.

Trustees' Liability, No Bond Required

Eleventh. Each Trustee shall be responsible only for his
own wilful and corrupt breach of trust, and not for any
honest error of judgment, and not one for another. No
Trustee shall be required to give a bond.

II. RIGHTS AND LIABILITIES OF CESTUIS QUE TRUSTENT,

NOTICES

Twelfth. Notices delivered personally, or mailed with
prepayment of postage seven days beforehand to any
cestui que trust, or to his attorney duly designated for the
purpose, at the residence stated by him or in the certificate,
or to the address given by him or them from time to time to
the Trustees, shall be binding.

Forfeiture of Payments

Thirteenth. In case any cestui que trust neglects to pay
any instalment within the time specified in the call therefor,
the Trustees may, if they see fit, declare any amount of his
previous payment or payments to be forfeited.

Certificates, Convertible Scrip, Lost Certificates

Fourteenth. The Trustees shall issue a certificate, in
such form as they shall deem best, to each person who shall
pay them the sum of one thousand dollars or multiple thereof,
for an interest in the Trust Fund. But no certificate shall
be issued for any less sum than one thousand dollars, at par
value. The Trustees may also from time to time, if they see
fit, issue scrip of the par value of one hundred dollars or mul-
tiples thereof, convertible into certificates in sums of one thou-
sand dollars or multiples thereof, and bearing interest, and on
such other terms and conditions as they shall deem best.

In case of the loss or destruction of a certificate or scrip,
the Trustees may issue a duplicate thereof, on such terms
as they deem proper.

357

APPENDIX OF FORMS

Transfer of Certificates

Fifteenth. The interests represented by the certificates
may be transferred on the books of the Trustees by the
person named therein, or his legal representative, upon the
surrender of the certificate, and a new certificate shall be
issued to the transferee, who shall thereupon become a
cestui que trust. But no such interest shall be sold until
the holder thereof (including assignees in insolvency or
bankruptcy, or for benefit of creditors, and holders by
process of law or otherwise, except as hereinafter stated)
shall have first in writing offered it for sale to the Trustees,
who shall, as such Trustees, have the option for ten days
after the receipt of such offer of buying the same at not
more than the last preceding appraisal made by them, such
appraisal to be made annually or oftener as they shall deem
best. Interests so purchased by the Trustees may be held
as part of the Trust Fund, or sold by them at their dis-
cretion.

Devises by will, distribution of the assets of deceased per-
sons according to law, and distribution of trust funds among
those entitled thereto upon the termination of trusts, shall
not be deemed sales for the purposes hereof.

No Assessment or Personal Liability

Sixteenth. No assessment shall ever be made upon the
cestuis que trustent, nor shall they ever be personally liable
in any event, or have any rights hereunder except as herein
defined.

Books Open to Inspection

Seventeenth. The books of the Trustees shall always be
open to the inspection of the cestuis que trustent.

Increase of Capital, Rights

Eighteenth. The Trustees may from time to time, at
their discretion, invite and receive payments for interests
in the Trust Fund in cash or in property, as hereinbefore
provided, for the purpose of increasing the capital of the
Trust Fund, giving preferonce, if they see fit, upon such terms
and c(jn(litions as they shall deem best, to existing cestuis
que trustent. All payments shall be subject to the terms of
this Declaration of Trust.

358

BOSTON PERSONAL PROPERTY TRUST

III. DURATION AND TERMINATION OF TRUST

Nineteenth. At and upon the expiration of twenty years
after the death of the last survivor of the following-named
persons : —

Walter Abbott, son of Jere Abbott of Boston;

George C, Adams, son of John Quincy Adams of Quincy;

Oliver Ames, son of Frederick L. Ames of Easton;

F. Reginald Bangs, son of Edward Bangs of Wareham;

Boylston A. Beal, son of James H. Beal of Boston;

Robert P. Blake, son of S. Parkman Blake of Boston;

Causten Browne, Jr., son of Causten Browne of Boston;

Edmund D. Codman, son of Robert Codman of Boston;

David H. Coolidge, Jr., son of David H. Coolidge of
Boston;

Philip Dexter, son of William S. Dexter of Boston;

John M. Howells, son of William D. Howells of Boston;

Laurence Minot, son of William Minot of Boston;

William Minot, 3d, son of William Minot, Jr., of Boston;

James Otis Porter, son of Alexander S. Porter of Beverly;

Abbott Lawrence Rotch, son of Benjamin S. Rotch, late
of Milton;

James J. Storrow, Jr., son of James J. Storrow of Boston;

Samuel Wells, Jr., son of Samuel Wells of Boston;

George Putnam, son of William L. Putnam of Boston;

Gladys Williams, daughter of Moses Williams of Brook-
line;

Robert S. Minot, Jr., son of Robert S. Minot of Manches-
ter;

,or at such earlier time as hereinafter provided, the Trustees
shall terminate this trust by dividing the Trust Fund, or
the proceeds thereof, among the cestuis que trustent, being
first duly indemnified for any outstanding obligation or
liability, and shall thereupon be forthwith discharged.

Alteration of Trust, Termination of Trust, Con-
veyance OF Trust Fund

Twentieth. The Trustees may, with the consent of the
three-fourths in interest of the cestuis que trustent, alter or
add to this declaration, or terminate this trust, and if it
seems to them judicious so to do, they may, with like consent,

359

APPENDIX OF FORMS

convey the Trust Fund to new or other Trustees, or to a
corporation, being first duly indemnified for any outstanding
obligation or liability. The instrument setting forth such
alteration, addition, termination, or conveyance shall be
signed by at least three of the Trustees and recorded in
said Registry of Deeds, or deposited with such Depositary
as the Trustees shall select. Such instruments shall be con-
clusive of the existence of all facts and of compliance with
all prerequisites necessary to the validity of such alteration,
addition, termination, or conveyance, whether stated in
such instrument or not, upon all questions as to title or affect-
ing the rights of third persons.

Provided, however, and it is especially declared, that
the Trustees shall be under no obligation to terminate this
Trust or convey the Trust Fund, except as hereinbefore pro-
vided.

In Testimonium

Twenty-first. In Witness Whereof, the said Trustees
have hereunto set their hands and seals the day and year
above written in duplicate.

Signed and sealed in presence of
Signed Charles H. Shriver

John Quincy Adams (Seal)

Moses Williams (Seal)

Signed ] William Minot, Junior (Seal)
A. Lawrence Lowell (Seal)
Robert S. Minot (Seal)

Commonwealth of Massachusetts!

Suffolk J " Boston, January 14, 1895.

Then personally appeared the above named John Quincy
Adams, Moses Williams, William Minot, Junior, A. Law-
rence Lowell, Robert S. Minot, and acknowledged the fore-
going instrument to be their free act and deed.
Before me,

Signed Charles H. Shriver,

Notary Public.

A true copy of the original on file with this Company.

State Street Trust Co.,

A. L. Carr, Treasurer.
300

BOSTON PERSONAL PROPERTY TRUST

BOSTON PERSONAL PROPERTY TRUST

Resignation of Charles C. Jackson as Trustee

Boston, Mass., March 31, 1906.

To Moses Williams, A. Lawrence Lowell, Robert S. Minot, and Charles
F. Adams, 2d, my Co-Trustees under a declaration of trust dated
January 10, 1893.

Dear Sirs, — I hereby resign my Trusteeship under said
Declaration of Trust, said resignation to take effect at the
close of business this day.

Very truly yours,

Charles C. Jackson.

Commonwealth of Massachusetts \

Suffolk / ^^' March 31, 1906.

Then personally appeared the above-named Charles C.
Jackson and acknowledged the foregoing instrument to
be his free act and deed.
Before me,

Edmund W. Young,

Notary Public.
(Notarial Seal)

A true copy of the original instrument on file with this
Company.

State Street Trust Co.,
By E. W. FooTE, Asst. Treasurer.

361

APPENDIX OF FORMS

BOSTON PERSONAL PROPERTY TRUST

Appointment of Henry B. Cabot as Trustee

We, Moses Williams, A. Lawrence Lowell, Robert S.
Minot, and Charles F. Adams, 2d, sole remaining Trustees
under a Declaration of Trust dated January 10, 1893, de-
posited with the State Street Trust Company of Boston,
acting under and by virtue of the powers to us given therein
(see Clause 10), do hereby appoint Henry B. Cabot of Brook-
line in the County of Norfolk and Commonwealth of Massa-
chusetts to be our Co-Trustee under said Declaration of
Trust in the place and stead of Charles C. Jackson, resigned
this day.

Witness our hands and seals at Boston, March 31, 1906.

Signed and Moses Williams,

sealed in A. Lawrence Lowell,

presence Charles F. Adams, 2d,

of Robert S. Minot,

Edmund W. Young — to all

Sole (Seal)

Remaining (Seal)

Trustees (Seal)

as Aforesaid (Seal)

Commonwealth of Massachusetts 1

Suffolk j ^^' March 31, 1906.

Then personally appeared the above-named Moses Wil-
liams, A. Lawrence Lowell, Robert S. Minot, arid Charles F.
Adams, 2d, and acknowledged the foregoing instrument to
be their free act and deed.
Before me,

Edmund W. Young,

Notary Public.
(Notarial Seal)

A true copy of the original instrument on file with this
Company.

State Street Trust Co.,
By E. W. FooTE, Asst. Treasurer.

362

E
BUENA VISTA FRUIT COMPANY

(Frost V. Thompson, 219 Mass. 360)

By-Laws of the Buena Vista Fruit Company

Article I
Executive Board
The Trustees shall appoint an Executive Board of three
who shall have the general direction, control and manage-
ment of the property and business of the Company. They
shall have ample power to purchase, lease, pledge and sell all
such personal and real property, and to make all such con-
tracts and agreements on behalf of the Company as they may
deem needful or convenient for the successful prosecution of
its business and operations. If in their opinion it shall be nec-
essary for the Company to borrow or raise monies in payment
for any real or personal property, or for any value received,
or for any purpose of the Company as set forth in the Decla-
ration of Trust, they may authorize the issue of notes or other
obligations by the Company for monies so borrowed. They
shall generally do such lawful acts, and adopt all such lawful
measures consistent with the Declaration of Trust and the
by-laws of the Company as they shall deem best calculated
to promote to the fullest extent the interest of the stockhold-
ers and investors. The members of said Executive Board
shall be designated as President, Treasurer and Secretary.

Article II

President
It shall be the duty of the president to preside at all meet-
ings of the Trustees and shareholders; to sign all contracts
in the name of the Company subject to the approval of the
Executive Board of Trustees; and to perform any other acts
incident to his office under the direction of the Trustees.

Article III
Treasurer
The treasurer shall have the custody of all monies, con-
tracts, documents and other papers belonging to the Com-

363

APPENDIX OF FORMS

pany, and of its common seal, and shall safely keep the same,
and shall collect all monies from time to time due and owing
to the Company, and disburse the same pursuant to the
contracts and obligations of the Company, or the order of
its Trustees. He shall make, sign, endorse, and accept for
and in the name and behalf of the Company, promissory
notes, drafts and checks in the regular course of its business.
He shall execute and deliver in behalf of the Company all
such instruments under its common seal as he may be or-
dered by the Trustees, and shall affix the common seal to all
certificates of stock issued by the Company, and shall per-
form such other duties as the Trustees may from time to
time require.

The treasurer shall give a bond to the Company for the
faithful performance of his duties, if required by the Trus-
tees, in such sum and with such sureties as they may re-
quire. He shall be subject to such conditions and restric-
tions as may be made by the Trustees.

Article IV

Secretary

The secretary shall attend the meetings of the Trustees
and shareholders and shall keep a record of the proceedings
of the same at their respective meetings. He shall have the
custody of all the books of the Company, and shall have the
power, in the absence of the treasurer to sign receipts, checks,
notes or other documents necessary in the conducting of the
business affairs of the Company. He shall perform such other
duties as the Trustees shall from time to time prescribe.

Article V
General Counsel

The Board of Trustees shall appoint a general counsel
who shall be an attorney and counsellor-at-law. He alone
shall act as the legal advisor of the Company, and any
action of the Board of Trustees, Executive Board, or any
other board or committee thereof, shall be subject to his
approval, and liis decision on all matters shall be final. He
shall draft all bonds, deeds, obligations, contracts, leases
and oth(!r legal documents of whatever nature that may be
r(;quir(!d by the Comj)any. He shall be present at all meet-
ings of the Trustees.

364

BUENA VISTA FRUIT COMPANY

Article VI

Finance Board

The Trustees shall appoint a finance board of two who

shall meet at least once each month and approve all bills

due and payable and when required examine all books of

account and vouchers of the Company and make report.

Article VII

Land Board

The Trustees shall appoint a land board of two who shall

have general supervision of the land location, streets, roads,

buildings and other work on the plantation at Omaja, Cuba,

as directed by the Executive Board of Trustees.

Article VIII

Meetings of the Trustees
The meetings of the Board of Trustees shall be held as
often as the needs of the Company may in their opinion re-
quire, and may be called by the president or by the treas-
urer or by any trustee, and the secretary shall notify the
trustees of such meeting, when requested, in writing. Said
notice to be mailed twenty-four hours before the said meet-
ing. Notice of any meeting may be dispensed with by each
Trustee by a writing filed with the records of the meeting
waiving such notice.

Article IX

Annual Meeting
The annual meeting of the Trustees shall be held on the
first Tuesday of October in each year at the office of the
Company in Boston, Mass. The fiscal year shall end with
September 1st of each year.

Article X

Offices
The principal offices of the Company shall be in Boston,
Massachusetts, with a branch office at Omaja, Cuba.

Article XI
Seal
The seal of the Company shall be circular in form and
bear on its face the name of the Company and shall be
capable of being impressed on paper.

365

APPENDIX OF FORMS

Article XII

Contracts for Sale of Land

All contracts for the sale of land made in the name of
the Company shall be signed by the president and approved
by the Executive Board of Trustees, and by the general
coimsel of the Company, and shall bear the imprint of the
seal of the Company.

Article XIII

Contracts Registered

All contracts made in the name of the Company shall be
registered by the secretary in a book kept for said purpose,
and shall contain the names and addresses of the parties
making said contracts.

Article XIV

Inspector

The contract holders in the Company shall annually ap-
point two of their number to go to Cuba and inspect the
work and condition of the plantation of the Company, and
shall make a report thereof. The entire expenses of said
inspectors to be borne by the Company.

Article XV

Amendments

These by-laws may be altered, amended or repealed by
vote of the Trustees or shareholders holding a majority of
the shares issued by the Company, represented in person or
by proxy, at any armual or special meeting of the Trustees
or shareholders, provided notice of such proposed amend-
ment shall be stated in the call for the meeting.
By-laws adopted.

Henry Richardson,
William Carleton,
Geo. B. Graves,
George L. Dunning,
Walter S. Thompson,

Trustees.

366

BUENA VISTA FRUIT COMPANY

BUENA VISTA FRUIT COMPANY

Declaration of Trust

An Agreement and Declaration of Trust made this
Twenty-seventh day of December, a.d. 1907, by and be-
tween the parties hereto establishing

The Buena Vista Fruit Company

Article I

The Trustees under this agreement shall be, unless and
until changed as hereinafter provided,

Henry Richardson
William Carleton
George B. Graves
George L. Dunning
Walter S. Thompson

who shall sign this instrument, which signatures shall be
taken as conclusive as to their appointment and acceptance
hereunder.

Article II

Henry Richardson
William Carleton
George B. Graves
George L. Dunning
Walter S. Thompson

Trustees hereunder, shall hold the title of all real estate and
personal property acquired for the purposes of the trust, and
shall execute all conveyances, assignments, transfers and
instruments affecting the same for the purposes of the trust,
and shall exercise all of the powers vested in them as such
Trustees.

Article III

It is expressly understood and agreed that no title, in-
terest or estate in any land, buildings or other property
held by the said Trustees at any time hereunder, is to
vest in any of the shareholders, but the same is to be and to
remain in said Trustees, their successors and assigns; that

367

APPENDIX OF FORMS

the sole right, claim and interest of each shareholder shall
be in the contract of the Trustees hereunder to hold, manage
and dispose of said property and account for the income and
proceeds thereof in the manner provided for in this instru-
ment; and that the shares represented by the certificates,
therefore, are to be and remain as to title personal property
only, and held, bequeathed, assigned, disposed of and dis-
tributed as personal estate. At all meetings shareholders
shall be entitled to one vote for each share and may vote by
proxy.

Article IV

The terms "said Trustees" and "the Trustees" whenever
used shall mean the Trustees above named and whoever may
be Trustees for the time being.

Article V

All powers vested in the Trustees may be exercised by a
majority of the Trustees for the time being or by the sur-
vivor or continuing Trustee in the event of a vacancy.

Article VI

The sum of $10.00 shall constitute one share of the Trust
and the certificate or certificates shall be issued therefor in
such form as the Trustees may from time to time provide
and shall be signed by a majority of the Trustees.

Article VII

The term "shareholder" used in this instrument shall
mean the holder of a certificate of a share or shares issued
under this Trust according to the records of the Trustees.
Every such holder of a share or shares becomes a party
hereto upon receiving a certificate therefor and ceases to be
a party hereto upon parting with the same. The death of
any shareholder during the continuance of this trust shall
not operate to determine the trust nor shall it entitle the
legal representative of such deceased shareholder to an ac-
count or to take any action in the courts or otherwise against
the Trust or the TruRt(K>s; but the executors, administrators
or assigns of the decedent shall accede to all the rights of
the decedent under this trust upon proper proof of title.
Shares shall be transferable as against the Trustees only on

368

BUENA VISTA FRUIT COMPANY

the books of the Trustees and upon the surrender of the out-
standing certificate; and until such transfer the Trustees
may deal with the record owner thereof and such dealings
shall be conclusive upon all the parties.

Article VIII

The purposes of the Trust shall be: —

(a) To acquire any parcels or parcel of real estate or
interest therein and manage, lease, develop, improve and
hold, mortgage or sell the same.

(6) To enter into, execute, adopt and fulfil any contract
for the erection, alteration or repair of any structure upon
real estate.

(c) To act as agent or Trustee in the care and management
of real and personal property committed to it by deed of
Trust or otherwise; to receive for investment the funds
of any person, firm or corporation or association and
to pay out the same as directed by such person, firm,
corporation or association and to deal and trade in stocks,
bonds, securities, goods, wares and merchandise of every
description.

(d) To have, purchase, convey, mortgage and lease within
or without the Commonwealth of Massachusetts, such real
or personal property as the purposes of the Trust may
require.

(e) To do any and all of the things in this certificate set
forth as business purposes, powers, or otherwise to the same
extent and as fully as natural persons might or could do, and
in any part of the world, as principals, agents, contractors.
Trustees or otherwise.

Article IX

It shall be the duty of the Trustees subject to maintaining
a proper cash balance to invest all monies coming to them
in accordance with the provisions of Article 8 hereof. They
shall keep full and proper books of account in such form as
to distinctly show all receipts and their sources and all dis-
bursements and their purposes; and keep other books in
proper form to show the original and all other shareholders,
their residences and shares held by each. They shall open
their books at all times during business hours to the inspec-
tion of any shareholder and investor.

369

APPENDIX OF FORMS

Article X

The Trustees shall have power to employ such attorneys,
agents, clerks and a treasurer, and to fix the duties to be
performed by them, to hire such office room as they may
deem expedient; to employ agents to procure contracts; to
fix their 0"«ti compensation; to use and expend the monies
of the Trust in any way that in their judgment wall advance
the purposes of the trust or assist the accomplishment of its
business; to deed, mortgage, lease, conveyance or other
instrument; and to distribute ratably among the share-
holders as dividends such portion of the net income as they
may deem expedient. Their decision as to the ratable pro-
portion due the several shareholders shall be final and pay-
ment of any dividend to stockholders of record shall be con-
clusive upon all parties.

Article XI

All contracts and engagements entered into by the Trus-
tees and all conveyances and instruments executed by said
Trustees shall be in their respective names as Trustees and
shall provide against any personal liability on the part
of the Trustees and stipulate that no other property
shall be answerable than the property in the hands of
the Trustees.

Article XII

The Trustees shall not be answerable for each other but
each shall be answerable onl}^ for his own wilful default or
neglect. "No Trustee shall be required as such to furnish
sureties.

Article XIII

Shareholders representing two-thirds in value of the out-
standing shares may by a written notice remove either or
any of the Trustees at any time A\athout assigning any cause;
but in the event of such removal the notice thereof shall ap-
point some person to fill the vacancy created. The notice
of removal shall be addressed to each of the Trustees, shall
state the fact of removal, the time the removal shall take
effect, the name and address of the Trustee to fill the vacancy,
and be signed Ijy several shareholders who shall affix to their
signatures the number of shares they respectively own. It

370

BUENA VISTA FRUIT COMPANY

shall be acknowledged by one or more of the signers and
shall be served upon each of the Trustees within the state by-
copy by any officer qualified to serve civil process in the
same manner that writs may be served and the original with
the return thereof shall be recorded in the city clerk's records
for Boston and the County of Suffolk within five days after
its service is completed.

Article XIV

The office of Trustee may be vacated : —
(a) By removal as provided in paragraph 13 hereof.
(6) By written resignation addressed to the remaining
Trustees and delivered to one of their number.

Article XV

Except as provided in paragraph 13 any vacancy in the
office of Trustees shall be filled by the remaining Trustees by
an appointment in writing under their hands; and upon
executing these articles in token of his acceptance said
appointee shall be a Trustee subject to all the provisions
hereof.

Article XVI

The Trustees under this agreement, now or hereafter hold-
ing office, shall deliver to their successors all books, papers,
writings and memoranda relating to the business of the
trust, and shall execute such assignments, transfers and
other conveyances that may be deemed advisable or expedi-
ent to facilitate the transaction of the business of the trust.

Article XVII

The Trust shall continue for the term of twenty years
subject to the provisions, however, of the following para-
graphs :

Article XVIII

The shareholders shall have power by writing signed by
two shares in value of the shareholders : —

(a) To terminate the Trust at any earlier period than that
named in paragraph 17.

(6) To terminate the Trust by requiring the Trustees to
convey the trust estate to other or new Trustees upon a new

371

APPENDIX OF FORMS

Trust which shall be for the benefit of all the shareholders in
proportion to their respective holdings.

(c) To terminate the Trust by requiring the Trustees to
convey the Trust Estate to a corporation having power inter
alia to receive the estate and invest the same as herein pro-
vided and whose shares shall be held by the shareholders
hereunder in proportion to their respective holdings.

Article XIX

Upon the distribution or conveyance of the Trust Estate
as provided in paragraphs 17 and 18, the Trustees shall be
under no further liability to any persons.

Article XX

This agreement may be amended from time to time by a
vote of holders of a majority of the outstanding shares and
the amendments shall be a part of these articles and binding
upon all parties hereto.

Article XXI

This instrument takes effect and becomes binding upon
all present and future shareholders of stock of said associa-
tion.

In Witness Whereof the said Trustees have hereunto
set their hands and seals in token of the acceptance of the
trust.

(Signatures of Trustees)

(Acknowledgment by Trustees)

372

F

BOSTON SUBURBAN ELECTRIC COMPANIES

Agreement and Declaration of Trust of the Boston
Suburban Electric Companies (as amended under
Article XIII, May 27 and December 5, 1907)

This Agreement made this 25th day of November, 1901,
by and between Adams D. Claflin, William F. Hammett
and Alden E. Viles, together with their assigns, hereinafter
designated as the "Subscribers," and Leonard D. Ahl, Adams
D. Claflin, William H. Coohdge, William F. Hammett,
Sydney Harwood, Frederic H. Lewis, George W. Morse,
Horace B. Parker, Alfred Pierce, Frank W. Remick, James
L. Richards, Charles W. Smith, Jerome C. Smith, R. Elmer
Townsend and Alden E. Viles, together with their successors,
hereinafter designated as the "Trustees," Witnesseth:
that

Whereas the subscribers propose to transfer, assign, con-
vey and deliver to the trustees, or to cause to be transferred,
assigned, conveyed and delivered to the trustees, under the
designation of the Boston Suburban Electric Companies
certain property as more particularly described and set forth
in a schedule identified by the signatures of the parties
hereto and filed with the trustees; and whereas the trustees,
for the purpose of defining the interest of the subscribers
and their assigns in such property, have agreed to issue to
the subscribers negotiable certificates or evidences of in-
terest as cestuis que trustent, to the number of forty-five
thousand shares, of which twenty-five thousand shall be
preferred and twenty thousand shall be common.

Now, therefore, the trustees hereby declare that they
will hold said property so to be transferred to them, as well
as all other property which may be hereafter transferred to
them or which they may acquire as such trustees, together
with the proceeds thereof, and all money and securities here-
after received by them in trust to manage, invest, reinvest
and dispose of the same, and to collect, receive and distribute

373

APPENDIX OF FORMS

the income and profits thereof for the benefit of the holders
from time to time of the certificates of shares from time to
time issued and outstanding hereunder, in the manner and
subject to the stipulations, conditions and limitations herein
contained, to "^it:

First. The trustees in their collective capacity, and so
far as practicable and convenient, shall be designated by and
act under the name of the Boston Suburban Electric Com-
panies and under that name shall, so far as practicable, con-
duct all business and execute all instruments in writing in
the performance of their trust.

Second. The trustees shall always be fifteen in number,
and of the trustees herein mentioned by name, William H.
Coolidge, Frederic H. Lewis, George W. INIorse, Horace B.
Parker and R. Ehner Townsend, shall hold office until the
first annual meeting of the shareholders; Alfred Pierce,
Frank W. Remick, James L. Richards, Charles W. Smith
and Jerome C. Smith, shall hold office until the second annual
meeting of the shareholders; and Leonard D. Ahl, Adams D.
Claflin, William F. Hammett, Sydney Harwood and Alden
E. Viles, shall hold office until the third annual meeting of
the shareholders; except that said trustees, as well as any
trustees hereafter elected, shall in all cases hold office until
their successors have been elected and accepted this trust.

The shareholders shall at each annual meeting or adjourn-
ment thereof elect five trustees to serve for a term of three
years next ensuing. In case of a vacancy arising in the board
of trustees by failure to elect, resignation, inability to act or
for any cause, the remaining trustees may appoint a trustee
to fill such vacancy for the unexpired term.

Whenever any change shall occur in the board of trustees,
the legal title to the stock and other property held in trust
shall pass to, and vest in the successors of said trustees with-
out any formal transfer thereof. But if at any time such for-
mal transfer shall be deemed necessary or advisable, it shall
be the duty of the board of trustees to obtain the same and it
shall be the duty of any retiring trustee, or the administrator
or executor of any deceased trustee to make said transfer.

Third. The trustees shall have and exercise the exclusive
management and control of all property at any time belong-
ing to tills trust, with all the rights and powers of absolute
owners thereof, subject only to the purpose of this agree-

374

BOSTON SUBURBAN ELECTRIC COMPANIES

ment; they may adopt and use a common seal; they shall
have power to vote in person or by proxy upon all certifi-
cates of stock at any time belonging to the trust, and to
collect, receive and receipt for the dividends thereon; to
contract with each or any of the companies in which they
may hold stock as said trustees in respect of any matter or
matters relating to the conduct of the business of any such
company or companies; to collect, sue for, receive and re-
ceipt for, all sums of money at any time coming due to said
trust; to employ counsel; to begin, prosecute, defend and
settle suits at law, in equity or otherwise, and to compromise
or refer to arbitration any claims in favor of or against the
trust; they may also, with the consent of not less than ten
of their number given at a meeting called for that purpose,
but not otherwise, exchange, upon such terms as may be
agreed upon, the stock or securities held by them in any cor-
poration for the stock or securities of any other corporation
taking over the property of such corporation by consolida-
tion or otherwise; may with such consent, but not other-
wise, loan money to any corporations in which they may at
any time own any shares of capital stock and may subscribe
for or acquire additional stock or the securities or obligations
of any such corporations; and may with such consent, but
not otherwise, subscribe for, purchase, acquire and hold the
bonds of the United States, of any county or of any State,
or of a county, city or town of any State of the United States
of America, which has not at any time repudiated any of
its debts; and may with such consent, but not otherwise,
also subscribe for, purchase, acquire and hold shares in the
capital stock or securities of any corporations, (1) owning
or operating railways or railroads or engaged in the business
of transporting merchandise, mails or express matter, or
(2) engaged in whole or in part in supplying light, water,
heat, power or entertainment, or (3) engaged in manufac-
turing or in any way dealing in any articles used by any
such corporations, or (4) engaged in the business of insuring
corporations of any or all of the foregoing classes against
loss by fire or casualty, or (5) engaged in the business of ad-
vertising in the cars or upon the premises of railway or rail-
road companies, or (6) with the concurrent consent of the
holders of a majority of each class of the outstanding shares
given at a meeting called for that purpose, in the shares of

375

APPENDIX OF FORMS

stock and securities in any corporation engaged in any-
other business not hereinbefore included.

The trustees may also, with the consent of not less than
ten of their number given as aforesaid, subscribe for, pur-
chase or otherwise acquire and own the stocks, shares, obliga-
tions and securities of any trust, association or partnership
engaged in whole or in part in any business of the charac-
ter above specified, and the stock, shares, obhgations and
securities of any corporation, trust, association or partner-
ship, including the stock, shares, obligations and securities
of this trust, which owns, or whose stocks, shares, obhgations
or securities are based upon or secured b}^ the stocks, shares,
obligations or securities of any corporation, trust, associa-
tion or partnership of the character above mentioned.

The trustees may also with the consent of not less than
ten of their number given as aforesaid from time to time
sell at pubhc or private sale, release, exchange, mortgage,
pledge or otherwise dispose of or encumber any or all of
the property from time to time held by them, for such prices
either in cash or in the stocks, shares, obligations or securi-
ties of other corporations, trusts, associations or partner-
ships, and upon such terms as to credit or otherwise as they
may deem expedient.

So far as strangers to this trust are concerned, a resolution
of the trustees authorizing a particular act to be. done shall
be conclusive e\ddence in favor of such strangers that such
act is within the powers of the trustees, and no purchaser
from the trustees shall be bound to see to the apphcation
of the purchase money or other consideration paid, or de-
livered by or for said purchaser to or for said trustees.

Fourth. Stated meetings of the trustees shall be held as
they may from time to time, bj' vote or by-law, prescribe,
and other meetings shall be held from time to time upon the
call of the president, or any tlu-ee of the trustees. A ma-
jority of the board shall constitute a quorum, and the con^
currence of all the trustees shall not be necessary to the
validity of any action done by them, but the wish of the
majority of the trustees present and voting at any meeting,
as evidenced by a resolution of such majority, shall be con-
clusive, except as hereinbefore or hereinafter specifically
provided; and the certificate of the secretary of the trustees
shall be conclusive as to the regularity of any meeting of the

37(3

BOSTON SUBURBAN ELECTRIC COMPANIES

trustees, the presence thereat, and concurrence in any ac-
tion, vote or resolution there taken, of a majority of the
trustees, and as to any other facts or statements in such
certificate set forth. The trustees may make, adopt, amend
or repeal such by-laws, rules and regulations not inconsistent
with the terms of this instrument as they may deem neces-
sary or desirable for the conduct of their business, and for
the government of themselves and their agents, servants
and representatives.

They may, as such trustees, hold either in their joint
names, or in the name of the trust, or in their several names,
or, under such safeguards against loss as may be advised by
counsel, in the name of such other persons as they may from
time to time determine, any of the property of the trust.

Fifth. The trustees shall annually elect from among their
number a President and a Vice-President of the board, and
shall also annually elect a Treasurer and a Secretary, and
they shall have authority to appoint such other officers,
agents and attorneys as they may from time to time deem
necessary or expedient. They shall have authority to ac-
cept resignations and to fill any vacancy in the office of
President, Vice-President, Treasurer, or Secretary, for the
unexpired term; and shall likewise have authority to elect
temporary officers, to serve during the absence or disability
of regular officers. The President, Vice-President, Treas-
urer and Secretary shall have such authority and perform
such duties as may from time to time be determined by the
trustees. The Secretary shall be sworn to the faithful per-
formance of his duties. The trustees shall fix the compensa-
tion, if any, of all officers and agents whom they may appoint,
and are likewise authorized to pay to themselves such com-
pensation for their own services as they may deem reason-
able, not exceeding, however, in the aggregate, the amount
of one per centum on the gross income of the trust property
in lieu of the percentage upon the gross income, as usually
allowed by the Courts of the Commonwealth of Massachu-
setts to trustees under wills and other instruments, but any
trustee may be employed by the trustees to perform any
special, legal, financial or other service and may be elected
or appointed to any office, and shall in any such case be en-
titled to receive such additional compensation as the trus-
tees may fix and determine; the aggregate compensation,

377

APPENDIX OF FORMS

and the limitation thereof hereinbefore stated being in-
tended and hereby declared to be only for the general
services of the trustees in their collective capacity as custo-
dians and managers of the trust property. Any trustee may
acquire, hold, own and dispose of shares in the trust in his
individual name, and on his personal account, oi jointly
with other persons, or as a member of a firm, without being
thereby disqualified to act as a trustee, and, while so owning
and holding any trust certificates on his personal account,
shall be entitled to all and the same rights and privileges of
and as any other shareholder. The trustees may also appoint
from among their number an executive committee of three or
more persons, to whom they may delegate such of the powers
herein conferred upon the trustees as they may deem expe-
dient, except so far as those matters are concerned in which
the concurrent action of at least ten trustees is required.

The trustees shall not be liable for errors of judgment
either in holding property originally conveyed to them or in
acquiring and afterwards holding additional property, nor
for any loss, arising out of any investment, nor for any act,
or omission to act, performed or omitted by them, in the
execution of this trust in good faith; nor shall they or any
or either of them, be liable for the acts or omissions of each
other, or of any officer, agent, or servant appointed by or
acting for them, and they shall not be obliged to give any
bond to secure the due performance of this trust by them.

Sixth. Shares hereunder shall be divided into preferred
and common shares. The preferred shares shall entitle the
holder to a cumulative quarterly dividend at the rate of
four dollars per annum, and no more, the same to be paid
or set apart out of the net earnings before any dividend shall
be paid or set apart for the common shares; and in case of
liquidation, the proceeds of the liquidation shall be first
applied to the payment to the registered holders of preferred
shares of the sum of one hundred dollars per share and any
accrued and unpaid dividends thereon, and the balance
remaining thereafter shall be divided among the registered
holders of common shares in proportion to their holdings.
As evidence of the ownership of said shares, the trustees
shall cause to be issued to each shareholder a negotiable
certificate or certificates, which certificates shall be substan-
tially in the form following, to wit:

378

BOSTON SUBURBAN ELECTRIC COMPANIES

(Form of Certificate of Preferred Shares.)

Boston Suburban Electric Companies
No Shares.

Not Subject to Assessment

This certifies that

is the holder of

preferred shares in the Boston Suburban Electric Com-
panies, which he holds subject to an Agreement and Declara-
tion of Trust, dated November 1901, and on file with

the Boston Safe Deposit & Trust Company which is hereby-
referred to and made a part of this certificate.

The shares in said Boston Suburban Electric Companies
are divided into two classes, known as preferred and com-
mon, and the holders of the preferred shares are entitled to
receive dividends out of the net earnings of the Companies,
at the rate of four dollars per aimum, and no more, payable
quarterly, in each year, which shall be paid or set apart
before any dividends shall be paid or set apart on the
common shares.

The dividends on the preferred shares are cumulative
and if, in any period of three months, quarterly dividends
at the rate of four dollars per annum are not paid on said
preferred shares, the accrued and unpaid dividends are a
charge on the net earnings of the Companies, payable sub-
sequently before any dividends are paid upon the common
shares.

In the event of liquidation, the proceeds of liquidation
will be first applied to the payment to the holders of pre-
ferred shares of the sum of one hundred (100) dollars per
share and any accrued or unpaid dividends thereon; and
the balance remaining thereafter will be divided among
the holders of common shares in proportion to their
holdings.

This certificate must be signed by the Transfer Agent,
and by the Agent to register transfers; and no trans-
fer hereof will be of any effect as regards the Boston
Suburban Electric Companies until this certificate has
been surrendered and the transfer recorded upon their
books.

In witness whereof, the trustees under said Declaration
of Trust, herein designated as the Boston Suburban Electric

379

APPENDIX OF FORMS

Companies, have caused their common seal to be hereto
aflaxed and this certificate to be executed in their name and
behalf by their President and Treasurer.

Boston Suburban Electric Companies.

By

President.

Attest:

Treasurer.
Boston Safe Deposit & Trust Co.

Transfer Agent.

By

By

Massachusetts National Bank,

Agent to Register Transfers.

By

(Form of Transfer)

For value received I hereby sell, assign, transfer, and

deliver to

of the within

named shares of the Boston Suburban Electric Companies,
I hereby request that said transfer be recorded on the books
of said Companies. .

Witness my hand, this day of

19

Witness,

(Form of Certificate of Common Shares)

Boston Suburban Electric Companies

No Shares.

Not Subject to Assessment.

This certifies that is the

holder of common shares in the

Boston Suburban Electric Companies, which he holds sub-
ject to an Agreement and Declaration of Trust, dated

November 1901, and on file with the Boston Safe

Deposit & Trust Company which is hereby referred to and
made a part of this certificate.

380

BOSTON SUBURBAN ELECTRIC COMPANIES

The shares in said Boston Suburban Electric Companies
are divided into two classes known as preferred and common,
and the holders of the preferred shares are entitled to receive
dividends out of the net earnings of the Companies, at the
rate of four dollars per annum, and no more, payable quar-
terly in each year, which shall be paid or set apart before any
dividends shall be paid or set apart on the common shares.

The dividends on the preferred shares are cumulative and
if, in any period of three months, quarterly dividends at the
raite of four dollars per annum are not paid on said preferred
shares, the accrued and unpaid dividends are a charge on
the net earnings of the Companies, payable subsequently
before any dividends are paid upon the common shares.

In the event of liquidation, the proceeds of Hquidation will
be first applied to the payment to the holders of preferred
shares of the sum of one hundred (100) dollars per share
and any accrued and unpaid dividends thereon; and the
balance remaining thereafter will be divided among the
holders of common shares in proportion to their holdings.

This certificate must be signed by the Transfer Agent, and
by the Agent to register transfers; and no transfer hereof
will be of any effect as regards the Boston Suburban Electric
Companies until this certificate has been surrendered and
the transfer recorded upon their books.

In witness whereof, the trustees under said Declaration of
Trust, herein designated as the Boston Suburban Electric
Companies have caused their common seal to be hereto
affixed and this certificate to be executed in their name and
behalf by their President and Treasurer.

Boston Suburban Electric Companies.

By

President.

Attest:

Treasurer.
Boston Safe Deposit & Trust Co.

Transfer Agent.

By

By

Massachusetts National Bank,

Agent to Register Transfers.

By :

381

APPENDIX OF FORMS
(Form of Transfer)

For value received I hereby sell, assign, transfer, and de-
liver to

of the within named shares of the Boston

Suburban Electric Companies and I hereby request that said
transfer be recorded on the books of said Companies.

Witness my hand, this day of 19 . . .

Witness,

Said certificates may be transferred at any time by the
registered holders thereof, or by their personal representa-
tives, such transfer to be made by delivery of the certificates
to the transferee, together with a written transfer of the
same of a written power of attorney to sell, assign and trans-
fer the same, signed by the registered holder of the certificate
or his personal representatives; but no such transfer shall
affect the right of the trustees to treat the registered holder
of the certificate as the holder in fact until the certificate
has been surrendered and the transfer has been duly recorded
on the books of the trustees. Each transferee or holder of the
certificate shall be held by the fact of his acceptance of it to
have assented to the trusts and agreements herein set forth.

In case of the loss or destruction of any certificate issued
by the trustees, the trustees may, under such conditions as
they may deem expedient, issue a new certificate or certifi-
cates in the.place of the one lost or destroyed.

Seventh. The trustees may, from time to time, for the
purpose of providing means for the acquisition of additional
property or otherwise accomplishing the purposes of this
trust, with the consent of not less than ten of their number
given at a meeting called for that purpose, issue and dispose
of shares in addition to those originallj' issued to subscribers
as hcrcin])efore stated, so that the total number of shares
issued shall be not exceeding in the aggregate thirty thou-
sand preferred shares and thirty thousand common shares;
and for said purposes with the concurrent consent of the
holders of a majority of each class of the outstanding shares
given at any meeting called for that purpose, borrow money
or issue and dispose of shares in addition to the aggregate
number above mentioned, upon such terms and in such
manner as the shareholders at such' meeting may determine.

382

BOSTON SUBURBAN ELECTRIC COMPANIES

Except with such concurrent consent no money shall be
borrowed and no shares shall be issued by the trustees to an
amount exceeding thirty thousand preferred shares and
thirty thousand common shares.

Eight. The trustees may, from time to time, declare and
pay dividends out of the net income from time to time re-
ceived by them from dividends upon the stocks and interest
upon the bonds, notes and other obligations, and from the
income or profit from other investments of the trust funds
held by the trustees under this agreement and declaration of
trust, but the amount of such dividends and the payment of
them shall be wholly in the discretion of the trustees; and
the trustees shall have full power and authority to determine
what portion of any receipts or expenditures ought in fair-
ness to be treated as income, and shall have authority to
reserve in each year such a sum as they deem wise from the
gross income actually collected as a reserve or surplus fund,
with power to use said fund or the proceeds thereof at any
time for the maintenance of dividends, or to treat the same
or any part thereof, as surplus capital, and to change their
determination as to said fund, or any part thereof, from time
to time as to them may seem prudent and expedient, abso-
lutely at their own discretion; except that the dividends on
the preferred shares shall not begin to accrue until January
15th, 1902, and shall be payable quarterly on the Fifteenth
days of January, April, July and October, in each year,
beginning April 15th, 1902, at the rate of four dollars per
annum, and no more, and shall be cumulative, and said
quarterly dividends shall be paid or set apart before any
dividends are paid on the common shares.

Ninth. The fiscal year of the trustees shall end on the
thirtieth day of September in each year. Annual meetings,
for the election of five trustees and for the transaction of
other business, shall be held in Boston on the Thursday
following the first Monday of December, in each year,
beginning with the year 1902, of which meetings notice
shall be given by the Secretary, by mail, to each share-
holder, at his registered address, at least seven days before
said meeting.

Special meetings of the shareholders may be called at any
time, upon seven days' notice, given as above stated, when
ordered by the President or trustees. At all meetings of the

383

APPENDIX OF FORMS

shareholders, each holder of shares, whether preferred or
common, shall be entitled to one vote for each share held
by him, and any shareholder maj^ vote by proxy.

No business shall be transacted at any special meeting of
the shareholders, miless notice of such business has been
given in the call for the meeting.

No business except to adjourn shall be transacted at any
meeting of the shareholders unless the holders of a majority
of all the shares outstanding are present in person or by
proxy.

Tenth. The death of a shareholder or trustee during the
continuance of this trust shall not operate to determine the
trust, nor shall it entitle the legal representatives of the
deceased shareholder to an accounting, or to take any action
in the courts or elsewhere, against the trustees; but the
executors, administrators, or assigns of any deceased share-
holder, shall succeed to the rights of said decedent under
this trust upon the surrender of the certificate or the certifi-
cates owned by him.

The ownership of shares hereunder shall not entitle the
shareholders to am^ share in or to the trust property what-
soever, or right to call for a partition or division of the same.
And it is hereby expressly declared and agreed that a trust,
and not a partnership, is created by this instrument, and
that the shareholders are cestuis que trustent, and hold no
other relation to the trustees than those of cestuis que trust-
ent with only such rights as are conferred upon them as such
cestuis que trustent hereunder.

Eleventh. The trustees shall have no power to bind the
shareholders personally, and the subscribers and their as-
signs, and all persons or corporations extending credit to,
contracting with, or having any claim against the trustees,
shall look only to the funds and property of the trust for
pajonent under such contract or claim, or for the payment
of any debt, damage, judgment or decree, or of any money
that may otherwise become due or payable to them from
the trustees, so that neither the trustees nor the shareholders,
present or future shall be personally liable therefor.

In every written order, contract or obligation which the
trustees shall give or enter into, it shall be the duty of the
trustees to refer to this declaration and to stipulate that
neither the trustees nor the shareholders shall be held to any

384

BOSTON SUBURBAN ELECTRIC COMPANIES

personal liability under or by reason of such order, con-
tract or obligation.

The purpose of this trust being to hold for investment and
profit for the benefit of the shareholders as cestuis que
trustent, all the stocks, bonds, securities and other property
assigned, transferred and conveyed or caused to be assigned,
transferred and conveyed by the subscribers to the trustees,
and to make such further investments as may be from time
to time determined upon in accordance with the provisions
hereof, and from time to time to change such investments
and to re-invest the proceeds realized from the sale of any
of the trust property, and to invest such further funds and
moneys as may at any time be paid to or come into the pos-
session of the trustees for investment; it is understood and
agreed that the trustees as such shall have no power to, and
shall not at any time engage in, any business of any kind
other than the purchase, holding and sale of property as and
for investments, nor to make any contracts except such as
relate to the purposes aforesaid, or are incidental thereto,
or such as are in this declaration either specifically authorized
or to be reasonably implied; but in construing the terms and
provisions of this declaration and the authority by it con-
ferred upon the trustees, they shall be the sole judges and
their decision, or that of a majority of them in any doubt-
ful case, or in any case, where a question arises, shall be
conclusive and binding.

Twelfth. This trust shall continue for the term of twenty-
one years, at which time the then board of trustees shall
proceed to wind up its affairs, liquidate its assets, and dis-
tribute the same among the holders of preferred and com-
mon shares according to the priorities hereinbefore expressed;
provided, however, that if prior to the expiration of said
period, the holders of at least two-thirds of the shares then
outstanding shall, at a meeting called for that purpose, vote
to terminate or continue this trust, then said trust shall
either terminate or continue in existence for such further
period as may then be determined; provided further, how-
ever, that upon the request of the holders of at least two-
thirds of each class of the shares then outstanding by vote
or resolution thereof at a meeting of the shareholders called
for that purpose the trustees may, if it seems to them ju-
dicious so to do, convey the trust property to new or other

385

APPENDIX OF FORMS

trustees, or to a corporation according to the terms of such
request and in the manner stated therein, being first duly
indemnified for any outstanding obhgations; and the then
trustees upon filing with the said Boston Safe Deposit and
Trust Company their certificate, or that of a majority of their
number that they have complied with such request, shall be
under no further obligations; provided further, however,
that it is especially understood and agreed that nothing in
this provision contained shall be construed as making it
obligatory upon the trustees to comply with such request.
For the purpose of winding up its affairs and liquidating the
assets of the trust the then board of trustees shall continue
in office until such duties have been duly performed.

Thirteenth. This agreement and declaration of trust may
be amended or altered, except as regards the habilities
of the trustees, at any annual or special meeting of the
shareholders with the consent of the holders of at least
two-thirds of the shares of each class then outstanding;
provided notice of the proposed amendment or alteration
shall have been given in the call for the meeting; and in
case of such alteration or amendment, the same shall be
attached to and made a part of this agreement, and a
copy thereof shall be filed with the Boston Safe Deposit &
Trust Company.

Fourteenth. The word "Trustees," and the expression
"said trustees," and "the trustees," as used in this instru-
ment shall mean the trustees for the time being under these
presents and the word "shareholders" whenever used in
this instrument, and whenever the context does not clearly
require another meaning, shall mean and refer to the holders
for the time being of the issued and outstanding certificates
in the Boston Suburban Electric Companies.

In Witness Whereof, the said Leonard D. Ahl, Adams
D. Claflin, Wilham H. Coolidge, William F. Hammett,
Sydney Harwood, Frederic H. Lewis, George W. Morse,
Horace B. Parker, Alfred Pierce, Frank W. Remick, James
L. Richards, Charles W. Smith, Jerome C. Smith, R. Elmer
Townsend and Alden E. Viles, hereinbefore mentioned,
have hereunto set their hands and seals, in token of their
acceptance of the trust hereinbefore mentioned, for them-
selves and their successors, and the said Adams D. Claflin,
William F. Hammett and Alden E. Viles, have hereunto

38G

BOSTON SUBURBAN ELECTRIC COMPANIES

set their hands and seals, in token of their assent to and ap-
proval of said terms of trust, for themselves and their assigns,
the day and year first above written.

Filed in the Office of the Commissioner of Corporations,
June 2, 1910.

387

G

LUDLOW MANUFACTURING ASSOCIATES
Declaration of Trust

[Dated Januarj' 1st, 1902. In this reprint are incorporated the several
amendments to the original Trust Declaration made January
14th, 1904, and December 19th, 1911. Filed with the Old Colony
Trust Company of Boston.]

Whereas, the Ludlow Manufacturing Company, a cor-
poration duly incorporated under the laws of the Com-
monwealth of Massachusetts, pursuant to votes of its
Directors and stockholders, has conveyed and trans-
ferred to Richard H. Weld, Charles W. Hubbard, Cran-
more N. Wallace, John E. Stevens, Ernest W. Bowditch,
Francis Blake, William D. Winsor, Emor H. Harding,
Henry 0. Under^''ood, Trustees, all its property real and
personal and of whatever nature, except the property' real
and personal described in a schedule hereto annexed marked
"A"; and

Whereas, the stockholders of said Company have also
respectively transferred to said Trustees their several hold-
ings of the shares of said Company; and

Whereas, all the said property and shares so conveyed
and transferred to the Trustees, together with any other
property hereafter acquired by them, is and are to be held,
used, and managed upon the trusts herein declared, and for
the convenient definition of the several interests in said trust
property of the stockholders of said corporation, their assigns
and legal representatives, the same has been divided into
Thirty thousand (30,000) shares of the par value of One
liundrcd dollars (SlOO) each, negotiable certificates for which
are to be issued to said stockholders, their assigns and legal

388

LUDLOW MANUFACTURING ASSOCIATES

representatives, in the proportion of their holdings of stock
in said corporation as shown by its books on the first day of
January, 1902.

The said Trustees hereby declare that all the prop-
_erty and shares conveyed to them as aforesaid, together with
any hereafter acquired by them under the provisions of this
instrument, is and are to be held for the account and benefit
of the holders from time to time of the certificates of shares
issued hereunder, and is and are to be held, used, managed,
and administered upon the trusts and in the mamier fol-
lowing : —

Article I

The said Trustees, designating themselves so far as may
be convenient and proper by the name of the " Ludlow Man-
ufacturing Associates," may use and employ the trust prop-
erty and assets:

First. In paying the corporate debts of said Ludlow Man-
ufacturing Company and in discharging the liabilities under
contract or otherwise of said Corporation;

Second. In the manufacture at Ludlow, Springfield, or
Wilbraham, of flax, hemp, jute, cotton, wool, silk, and other
fibres, and in the manufacture of paper and carpets, and of
machinery or other articles composed in whole or in part
of wood or metal — the said manufacturing enterprises to
be carried on either directly or through corporations or other
organizations in which the Trustees own a controlling
interest ;

Third. In investments in the shares of any electric light,
railroad, or power company operating in whole or in part
in the City of Springfield, or in the towns of Palmer, Chic-
opee, Ludlow, and Wilbraham, and in contracts with any
such company or any other company for the purchase or
sale of electricity;

Fourth. In establishing at any other place or places
within or without the Commonwealth industries simi-
lar to those now or hereafter established on their prop-
erties in Ludlow, Springfield, or Wilbraham whenever the
interests of said last named industries may render such
course advisable — such establishment to be effected by
new construction, by the purchase in whole or in part of

389

APPENDIX OF FORMS

existing plants, or by giving in exchange for the stock
or securities of any corporation or other organization
other securities owned by the Trustees or shares issued
under this instrument;

Fifth. In the purchase, sale, renting, or leasing of real
estate and power of any description, as the interests of the
Trust may from time to time require, and in improving and
developing any real estate or water power held by them by
the building of storage reservoirs, the erection of buildings,
the construction of streets and sewers, and by all other
methods conducive in the judgment of the Trustees, to the
■^-ise and profitable use of said real estate or of said water
power.

To enable the Trustees to fully execute this Trust, they
are hereby empowered: —

1. To carry on any business above described according to
their discretion and to employ therein such agents or agencies
as they may deem expedient;

2. To pay all taxes, assessments, and necessary expenses;

3. To buy any property, real or personal, including shares
or obligations issued hereunder, and any rights, fran-
chises, privileges, or securities which the conduct of
any business above described may in their judgment
require, or which may in their judgment tend to pro-
mote its successful prosecution or the interest of the share-
holders, and to hold, use, lease, or sell the trust property
or any part thereof (except as hereinafter provided) at
their discretion;

4. To borrow money for any business above described
or for the purchase of any property herein authorized
and to give notes, make contracts of guaranty or
suretyship, or enter into other obligations therefor, and
to pledge the personal property of the Trust or any part
thereof (except as hereinafter provided) to secure such
notes or obligations or any contract entered into in the
course of the execution of this Trust; provided, however,
that all notes or obligations given for money borrowed
shall l)ear the written approval of at least one Trustee in
addition to the signature of the Treasurer or other author-
ized officer;

5. To create a reserve fund by investing in any securities
that are legal investments for the savings banks of the Com-

390

LUDLOW MANUFACTURING ASSOCIATES

mon wealth of Massachusetts or of the State of New York;
also to make loans upon such collateral securities or en-
dorsements as are prescribed by statute in the case of loans
by the savings banks of the Commonwealth of Massachu-
setts or of the State of New York,

6. To exercise exclusive control and management of the
trust property; to vote in person or by proxy upon all shares
of stock belonging to the Trust and to collect and receipt
for any dividends thereon, provided, however, that shares
issued hereunder and purchased by the Trustees for the
account of the Trust shall not, so long as they belong to the
Trust, either receive dividends or be voted at any meeting
of shareholders; to contract with any company controlled
by them, to begin and defend legal proceedings, employ
counsel, and compromise or arbitrate claims; and generally
to do all acts and things necessary and proper for the com-
plete execution of this Trust and the protection of the in-
terests of shareholders therein, provided, however, that the
Trustees shall have no power to bind the shareholders per-
sonally by any contract, express or implied, or by any act,
neglect, or default; that neither Trustees nor shareholders
shall be personally liable on any such contract or for
any such act, neglect, or default, and that any party
to such contract or injured by such act, neglect, or de-
fault shall have recourse for satisfaction, payment, or
indemnity solely to the trust estate; that for any judg-
ment recovered against and paid by the Trustees, they
shall be entitled to reimburse themselves from the trust
estate; and that every note, bond, obligation, or contract
in writing made or given by the Trustees shall, by ex-
plicit reference to this Declaration of Trust, give notice
of the limitations upon the power of the Trustees and
of the exemption from personal liability of both Trustees
and shareholders and shall contain an express declaration
that no recourse shall be had in any event to any Trustee
or shareholder.

No sale or mortgage of the real estate of the Trust nor of
any of its industrial establishments nor of the stock of the
Ludlow Manufacturing Company, and no lease of real estate
or power belonging to the Trust and exceeding the annual
rental value of Ten thousand dollars ($10,000) shall be made
by the Trustees until the same shall have been first approved

391

APPENDIX OF FORMS

by the vote of two-thirds in interest of the shares entitled
to vote under this Declaration of Trust and voted by the
holders thereof in person or by proxj^ at an annual or special
meeting notified as herein prescribed and the call for which
shall state that such sale, mortgage, or lease is to be acted
upon at said meeting.

Shares issued hereunder and bought by the Trustees for
the account of the Trust shall be reported to the shareholders
at the next annual meeting after such purchase and be dis-
posed of as said meeting may determine.

Article II

A majority of the Trustees shall constitute a quorum and
any action taken at a meeting at which a quonmi is present
and which meeting has been duly notified in the manner
pre^-iously prescribed by the Trustees shall be operative and
effective as the act of all the Trustees; pro^'ided, however,
that the approval of six (6) Trustees given at a duly notified
meeting shaU be necessary' for action on all matters relating
to the loaning of money, the absorption of new plants either
by purchase or otherwise, the starting of new industries in
Ludlow, Springfield, or Wilbraham, and the estabhshment
of branch industries elsewhere.

In no event shall any purchaser be bound to see to the
apphcation of the purchase monej' or other consideration
received or realized upon the execution of any deed, bill of
sale, mortgage, transfer, or other conveyance authorized as
aforesaid, and so far as strangers to the Trust are concerned,
a resolution of the Trustees certified as such by their Secre-
tary and authorizing a particular act to be done shall be
conclusive e\adence that such act is within the powers of the
Trustees.

The Trustees shall annually elect from among their num-
ber a President, and shall elect from among their number or
otherwise, a Treasurer, Secretary, and in their discretion,
Vice-Presidents, Assistant Treasurers, Assistant Secretaries,
and such other officers or agents as they may deem advisable,
and may act in any manner by or through any such officer
or agent.

The Trustees may adopt and amend from time to time
by-laws for the conduct of their business, and in such by-

392

LUDLOW MANUFACTURING ASSOCIATES

laws or in regulations adopted at any meeting, may define
duties of their officers, agents, servants and representatives.

Article III

The title to the trust property of every description and
the right to the conduct of any business hereinbefore de-
scribed are vested exclusively in the Trustees, so that share-
holders are without interest therein other than that con-
ferred by their shares issued hereunder, and shall have no
right to call for any partition, accounting, or division of
property, profits, rights, or interests.

Shares shall be personal property giving only the rights
in this instrument and in the certificates thereof specifically
set forth. The death of a shareholder during the contin-
uance of this Trust shall not terminate the Trust nor give
his or her legal representatives a right to an account or to
take any action in the courts or otherwise against other share-
holders or the Trustees, but shall simply entitle the legal rep-
resentati"\;^es of the deceased to demand and receive a new cer-
tificate of shares in place of the certificate held by the deceased,
upon the acceptance of which such legal representatives shall
succeed to all the rights of the deceased under this Trust.

Article IV

The profits arising from the conduct of the affairs of the
Trust shall from time to time and whenever the Trustees
shall so order be ratably divided among the shareholders
of record at the time of declaring a dividend.

The Trustees, however, may always retain such amount
of such profits as they may deem necessary to pay debts or
expenses or meet obhgations relating to the Trust or as they
may deem desirable to use in the conduct of its affairs.

Article V

The shares issuable hereunder by the Trustees at the in-
ception of this Trust to stockholders of the Ludlow Manu-
facturing Company, their assigns or legal representatives —
in the proportion of their several holdings — each share to
be of the par value of One hundred dollars (SlOO) — shall
be Thirty thousand (30,000) in all and shall be evidenced by
a negotiable certificate or certificates in the form following : —

393

APPENDIX OF FORMS

(Form of Certificate of Shares)

"Ludlow Manufacturing Associates
No Shares

This certifies that the

holder .... of ( ) shares

— par value One hundred dollars (SlOO) each — of the
property held and administered in trust by Trustees acting
under the name of the Ludlow ]Manufacturing Associates
and in accordance with and subject to a Declaration of Trust
dated January 1, 1902, which is on file with the Old Colony
Trust Company and which is hereby referred to and made
a part of this certificate.

This certificate must be signed by the Old Colony
Trust Company, Transfer Agent, and no transfer hereof
shall be effectual as regards the Ludlow IManufacturing
Associates until this certificate has been surrendered and
the transfer recorded upon the books of said Transfer
Agent.

In Witness Whereof the Trustees imder said Declara-
tion of Trust herein designated as the Ludlow IManufac-
turing Associates have caused their common seal to be hereto
affixed and this certificate to be executed in their name and
behalf by their President and attested by their Secretary
this day of 19

Ludlow Manufacturing Associates,

By

Attest: . .
Signed :

President.
Secretary.

Old Colony Trust Company,

Transfer Agent.

By

Assistayit Secretary.

By

Transfer Clerk."

394

LUDLOW MANUFACTURING ASSOCIATES

(Form of Transfer of Shares)

For value received hereby sell, assign,

transfer, and deliver to the

within named shares of the Ludlow Manufacturing Asso-
ciates and request that said transfer be recorded on the
books of said Transfer Agent.

Witness hand this

day of 19 ... .

The Trustees shall keep books of record of the certificates
of shares originally issued hereunder and of all transfers
thereof. Upon any transfer thereof, a new certificate or
new certificates shall be issued, being first recorded and
signed by the Transfer Agent appointed by the Trustees, and
only shareholders whose certificates are so recorded shall
be entitled to vote, or to collect dividends, or to otherwise
exercise and enjoy the rights of shareholders.

Each shareholder shall in writing notify the Treasurer of
the Trustees of his post-office address — which may be
changed by a like notice — and in the absence of any such
notice from a shareholder his post-office address shall be
taken to be Boston. The Treasurer shall file a memorandum
of the addresses of shareholders with the Transfer Agent
and keep it informed of any changes therein.

In case of the loss, mutilation, or destruction of a cer-
tificate, the Trustees may issue a new one upon such terms
as they see fit.

Article VI

The Trustees may, from time to time, with the consent
of the holders of two-thirds in interest of the shares entitled
to vote under this Declaration of Trust and voted at a meet-
ing the call for which shall contain specific notice of the
proposition to be submitted, issue and dispose of additional
shares for such purpose and in such manner as the share-
holders at such meeting may decide.

Article VII

The Trustees shall always be nine (9) in number, and of
the Trustees herein mentioned by name Francis Blake,
Cranmore N. Wallace, Richard H. Weld, shall hold office
until the first aimual meeting of the shareholders; Ernest

395

APPENDIX OF FORMS

W. Bowditch, Emor H. Harding, Charles W. Hubbard shall
hold office until the second annual meeting of the sharehold-
ers; and John E. Stevens, Henry O. Underwood, William D.
Winsor shall hold office until the third annual meeting of the
shareholders, except that said Trustees as well as any Trus-
tees hereafter elected shall in all cases hold office until their
successors have been elected and have accepted this Trust;
provided, however, that by written notice delivered or mailed
to the Secretary or President a Trustee may resign and that
such resignation shall take effect either immediately or at a
later date according to the terms of said notice.

Stated meetings of the Trustees shall be held at least once
a month and other meetings shall be held from time to time
upon the call of the President or any three (3) of the Trus-
tees. The vote of an absent Trustee may be counted pro-
vided that the vote in the form entered upon the records is
signed by him and attached to the records, and for the pur-
pose of passing said vote but no other he may be consid-
ered as present if necessary to form a quorum.

The Trustees may adopt, and from time to time amend
or repeal, such by-laws, rules, and regulations not incon-
sistent with the terms of this instrument as they may
deem necessary or desirable for the conduct of business and
the government of themselves and their agents.

The Trustees shall not be liable for errors of judgment
either in holding property originally conveyed to them or in
acquiring and afterwards holding additional property, or
for any loss resulting from any investment, or from any act
or omission to act performed or omitted by them in the exe-
cution of this Trust in good faith. They shall not be liable
for the acts or omissions of any officer, agent, or servant ap-
pointed, by or acting for them, nor be obliged to give any
bond to secure the due discharge of their trust, nor shall any
Trustee be liable for any act or default of any other Trustee.

Article VIII

The fiscal year of the Trustees shall end on the last Satur-
day of December, or the first Saturday of January, which-
ever may l)e nearest the thirty-first of December. Each
annual meeting shall ))e held in Boston on the third Tues-
day in January of each year, beginning with the year 1913,
of which meeting notice shall be given by the Secretary by

396

LUDLOW MANUFACTURING ASSOCIATES

mail to each shareholder at his registered address at least
ten days before said meeting.

At each annual meeting of the shareholders, the Trustees
shall make a full report upon the affairs of the Trust, and
upon its business and operations during the year preceding,
together with a statement of its financial standing as shown
by the books and accounts of the Treasurer.

At each annual meeting shareholders shall elect three (3)
Trustees to serve for the term of three (3) years next ensuing.

Upon the election of any Trustee by the shareholders or
by the remaining Trustees, he shall execute an acceptance
of this trust, which, together with a certificate of the Secre-
tary of the Trustees of the election of such Trustee, shall
be forthwith filed with the depositaries at that time having
the custody of this instrument.

In case of the death, resignation, or inability to act of any
Trustee, the remaining Trustees shall forthwith fill the
vacancy for the unexpired term. Upon any election of
Trustees by the shareholders, or by the remaining Trustees
in the case of vacancy, the trust estate upon the acceptance
of the Trust by the new Trustees or Trustee shall vest in
them or him and the continuing Trustees without any fur-
ther act or conveyance.

While any vacancy exists in the office of Trustee from
whatever cause, the continuing or surviving Trustees or
Trustee shall have all the powers and discharge all the
duties granted or imposed by this instrument.

Each Trustee hereunder shall be the holder of at least Ten
(10) shares and shall have the right to purchase at any pub-
lic or private sale any shares or securities issued hereunder.

Special meetings of shareholders may be called at any
time upon ten (10) days' notice given as above stated when
ordered by the President or the Trustees. At all meetings
of the shareholders each holder of shares, except as provided
in Article 1, Section Fifth, Paragraph 6, shall be entitled to
one (1) vote for each share held by him, and any shareholder
may vote by proxy.

No business shall be transacted at any special meeting
of shareholders unless notice of such business has been given
in the call for the meeting.

No business except to adjourn shall be transacted at any
meeting of shareholders unless a majority in interest of the

397

APPENDIX OF FORMS

shares entitled to vote under this Declaration of Trust are
represented by the holders thereof in person or by proxy.

Article IX

This Trust, unless sooner terminated by the shareholders
in the manner hereinafter provided, shall continue until the
first day of January, 1950, unless all of said above-named
Trustees and all successors to them now living shall have
died more than twenty-one (21) years before said date, in
which event this Trust shall terminate at the expiration of
twenty-one (21) years from the death of the last survivor
of said Trustees and said successors. At the termination
of the Trust, the Trustees shall wind up the affairs and busi-
ness of the Trust and, after paying and satisfying all obliga-
tions and liabilities thereof, shall divide the property then
in their hands or its net proceeds ratably among the share-
holders.

Article X

This Declaration of Trust may be altered or amended or
this Trust terminated by the vote of two-thirds in interest
of the shares entitled to vote hereunder and voted by the
holders thereof in person or by proxy at any meeting of the
shareholders duly notified pursuant to Article VIII by a
call for such meeting in which it is specifically stated that
such termination or such alteration or amendment is to be
acted upon. In case of a vote in favor of such termination
or of such alteration or amendment as the case may be, the
President and the Secretary of such meeting shall certify
such vote and any alterations or amendments so adopted in
writing to the said Trustees, and, when the Transfer Agent
has certified to the Trustees that the shareholders so voting
were the owners of shares to the requisite number at the time
of such meeting, the Trustees shall, if the vote is in favor of
termination, proceed to wind up this Trust in accordance with
Article IX, and in case such vote is in favor of alterations
and amendments, shall embody the same in a Supplementary
Declaration of Trust which they shall sign and deliver to said
Old Colony Trust Company, and which, being so executed
and deliv(;red, shall be conclusive evidence of the due adop-
tion by the shareholders of the alterations and amendments
ther(;in contained and thereafter shall have the same opera-
tion and effect as if originally embodied in this instrument.

398

LUDLOW MANUFACTURING ASSOCIATES

In Witness Whereof the said Trustees above named have

hereunto set their hands this first day of January, 1902.

Richard H. Weld,

Charles W. Hubbard,

Cranmore N. Wallace,

Jno. Ed. Stevens,

Ernest W. Bowditch,

Francis Blake,

William D. Winsor,

Emor H. Harding,

H. O. Underwood,

Trustees.

Charles W. Hubbard,

Cranmore N. Wallace,

Ernest W. Bowditch,

Francis Blake,

William D. Winsor,

Emor H. Harding,

H. O. Underwood,

Sidney Stevens,

Philip Stockton,

Trustees.
Commonwealth of Massachusetts "I

^^^^°^^ ^ ^^' Boston, March 3, 1902.

Then personally appeared the above-named Richard H.
Weld, Charles W. Hubbard, Cranmore N. Wallace, John
E. Stevens, Ernest W. Bowditch, Francis Blake, Emor H.
Harding, Henry 0. Underwood, and severally acknowledged
the foregoing instrument by them executed to be their free
act and deed. ^^^^^^ ^^^

Cyrus F. Cushing,

Notary Public.
Commonwealth of Pennsylvania

ss
City and County of Philadelphia J

February 20, 1902.

Personally appeared the above named William D. Winsor

and acknowledged the foregoing instrument by him executed

to be his free act and deed. -d -■

Before me,

Thos. J. Hunt,

Commissioner for the Commonweallh

of Massachusetts, at Philadelphia

/a n Pennsylvania, 623 Walnut Street.

^^"^^^ 399

H
BLANK HOTEL TRUST

This Indenture made at Boston in Massachusetts the

of day in the year 1912 between

of the one part and

(hereinafter called the Trustees which expression shall ex-
tend to and include the trustees for the time being of these
presents and the word Trustee shall apply to any one of the
said trustees where the context so admits) of the other part.

Whereas the lands and other property of the said

the particulars whereof are specified in the First Schedule
hereto have been respectively transferred to the Trustees

by the . •. or are intended to be forthwith so

transferred to the intent that the same shall be held upon
the trusts hereinafter expressed concerning the same to be
collectively designated as the Blank Hotel Trust.

Now this Indenture witnesseth and it is hereby agreed
and declared that the Trustees shall hold the said real estate
and other property and the investments for the time being
representing the same and the property and effects at any
time vested in them for the purposes of these presents (here-
inafter called the trust premises) in trust to sell and con-
vert into money the said real estate and to deal with the
proceeds thereof and the other property comprised in these
presents in the manner and with and subject to the powers
and provisions hereinafter contained concerning the same
for the benefit of the holders for the time being of the shares
hereinafter mentioned (hereinafter called the Shareholders)
according to the number of such shares held by them respec-
tively. But the Trustees shall have power to postpone the
conversion hereinbefore directed of the said real estate or
any part thereof so long as they in their uncontrolled dis-
cn^tion shall think proper so that the same shall not be post-
poned l)('3'ond the time herein limited for the continuance
of tlie trusts of these presents. And notwithstanding any

400

BLANK HOTEL TRUST

postponement of such conversion the said real estate shall
be considered as personal estate for the purposes of enjoy-
ment and transmission and the rents and income thereof
shall be applied as if they were the income of the proceeds
of such conversion.

The Trustees

1. The Trustees shall have power at any time or times
and from time to time.

(a) To manage and improve all lands and hereditaments
for the time being subject to any of the trusts hereof and
to erect pull down alter and repair buildings thereon and to
make such outlay as they shall think proper for the said pur-
poses and to insure buildings or the rents or rental value
thereof against loss or damage by fire or other casualty and
to insure against liability for damage to person or property
arising from anything happening upon the said lands or on
account of the condition thereof.

(6) To establish and carry on a hotel in the said buildings
or any of them.

(c) To purchase or acquire by means of the trust premises
any lands adjoining or near the lands specified in the said
schedule hereto and any personal effects which they may
think suitable or convenient for use in or about any of the
said buildings or in connection with the said hotel.

(d) To grant or create any easement or other right or
privilege over or in relation to any lands and hereditaments
at the time subject to any of the trusts hereof and to pur-
chase or acquire any easement or other right or privilege
over other land to be annexed in enjoyment to any lands and
hereditaments at the time subject to any of the trusts hereof
and to release any easement or restrictive covenant agree-
ment or provision over or affecting any other land for such
consideration and upon such terms as the Trustees shall
think fit.

(e) To grant leases at will or for any term of years in pos-
session or reversion and to make allowances to and arrange-
ments with tenants and others and to accept surrenders of
leases and tenancies.

(/) To raise or secure for the purposes of the trusts of
these presents such sums of money as they shall think proper

401

APPENDIX OF FORMS

and to mortgage or charge the whole or any part or parts of
the trust premises in such manner and on such terms as they
shall think proper for securing the repaj^ment of any moneys
so raised or secured and to pay off or enlarge the time for
pajnng off anj^ mortgage or charge for the time being exist-
ing or to make a new mortgage or charge for an}^ sum or
sums so secured.

(g) To sell the whole or any part of the trust premises in
Vv'hatever state of investment the same may be.

(h) To invest or deal with the moneys forming part of
the trust premises upon such securities or in such manner as
may from time to time be determined by them.

(i) To distribute any of the property held by the Trustees
among the Shareholders in specie.

(J) To cause any shares bonds or securities subject to
the said trusts to be transferred into the names of or
vested in the Trustees or any of them jointly with the
right of sur\'iyorship or in any one of them in such man-
ner as not to give notice that they are trustees thereof or
that the same are affected by an}' trust or to allow such
shares bonds or securities to remain in the name of or to be
transferred into the name of any other person firm or cor-
poration and to entrust to any incorporated trust com-
pany- for safe keeping any or all of the bonds certificates
securities and documents comprised in or relating to the
trust premises.

(k) To employ such agents as they shall think proper for
the management repair or insurance of anj" of the said
property or in conducting the business of the said trusts and
for seeing to the propriety and sufficiency of such repairs
and insurance without the Trustees being answerable for
the acts and defaults of such agents.

(/) To settle all accounts and to compound compromise
abandon or adjust by arbitration or otherwise any actions
suits proceedings disputes claims demands and things re-
lating to the trust premises and to transfer to and deposit
with any incorporated trust company or other persons any
shares or securities forming part of the trust premises for
the purposes of any arrangement for enforcing or protecting
the interests of the Trustees or the owners of such shares or
securities and to give time with or without security for the
payment or delivery of any debts or property and to execute

402

BLANK HOTEL TRUST

and enter into releases agreements and other instruments
and do all other things proper for any such purpose to pay
or satisfy any debts or claims upon any evidence that they
shall think sufficient.

(?n) To enter into arrangements expressed in writing for
any of the purposes hereinbefore mentioned that the pay-
ment of any sum of money or the performance of anything
that shall have been agreed upon shall be a floating charge
upon the real and personal property for the time being sub-
ject to the trusts of these presents in such manner that the
Trustees notwithstanding such charge may continue to deal
with the said real and personal property by way of sale
mortgage charge lease or otherwise or paying dividends out
of profits in accordance with the trust hereof and that the
Trustees shall not be liable for the payment of any such sum
of money or for damages for non-performance of anything
that shall have been agreed upon except out of the trust
premises so far as the same shall be sufficient for the purpose
and that no Trustee shall be in any way liable in respect
thereof after he ceases to be a trustee of these presents and
every such floating charge shall rank'pari passu with every
other such floating charge unless otherwise specially agreed.
And any agreement entered into in pursuance of these pres-
ents in the name of Hotel Trust shall without any ex-
press provisions to that effect operate as an arrangement
with the Trustees for such a floating charge as above men-
tioned and words may be added to any document containing
or relating to any such agreement or any part thereof to the
effect that contracts made in that name operate as a floating
charge created by the Trustees upon all the property com-
prised in these presents as herein provided and that the
Trustees are not liable upon any such contract except for
the application of such property in accordance with the
provisions hereof and no liability attaches to the Share-
holders.

(n) Generally in all matters not hereinbefore specified to
deal with the trust premises and to manage and conduct the
trusts hereof in any manner that they shall deem for the
interest of the Shareholders as fully as if the Trustees were
the absolute owners of the trust premises. And to execute
and do all such agreements deeds instruments and things as
they shall think proper for executing any of the powers or

403

APPENDIX OF FORMS

trusts contained in these presents and to authorize the exe-
cution of any such agreements deeds or instruments in their
names by any of their officers or other persons.

2. The Trustees shall not be obliged to incur any personal
liabiHty in the execution of any of the trusts or powers herein
contained and shall not have any power or authority to
borrow money or incur any liability on the credit or behalf
of the Shareholders or to make any contract binding them
personally or be entitled to look to the Shareholders for in-
demnity against any liability incurred by the Trustees or
any of them. But if the Trustees or any of them shall give
their or his personal security for the payment of any money
or otherwise incur any personal liability in respect of the
premises such Trustees or Trustee shall be entitled to in-
demnity out of the property for the time being comprised in
the trust premises against any and all Habihty arising out
of the same.

3. All real estate at any time vested in the Trustees for
any of the purposes of these presents shall be held by them
upon the Hke trust for sale and conversion and the like pow-
ers and provisions in respect of postponement thereof and
the application of the rents and income of the same as are
herein contained concerning the real estate specified in the
said schedule hereto.

4. In making any sale in pursuance of any of the powers or
trusts herein contained the Trustees shall have power to sell
by public auction or private contract and to buy in at any
sale by auction or rescind or vary any contract of sale and
to resell without being answerable for loss and for the said
purposes the Trustees may do and execute all proper deeds
instruments and things.

5. When any trustee is absent from Massachusetts New
York Connecticut and Rhode Island and has been so absent
for more than seven days or is unfit or incapable to act in
the said trusts the other trustee or trustees for the time being
of these presents may exercise the powers and authorities
hereby given to the Trustees. And any trustee so absent
or contemplating such absence may by power of attorney or
otherwise empower any other trustee, so to act on his behalf
and to use his name for execution or signature of documents
for the purposes of the said trusts without being responsible
for loss.

404

BLANK HOTEL TRUST

6. Any trustee may retire and be discharged from the said
trusts by deHvering his resignation thereof in writing under
his hand acknowledged in the manner required in the case
of a deed of conveyance of land to any other trustee for the
time being and such resignation shall be effectual and com-
plete only upon the appointment of a new trustee or trustees
in his place and meanwhile he shall continue to act as such
trustee.

7. If any trustee for the time being of these presents shall
die or resign or be removed or become unfit or incapable to
act in the said trusts it shall be lawful for the surviving or
continuing trustees or trustee for the time being (and for
this purpose any retiring trustee shall if willing to act in the
exercise of this power be considered a continuing trustee) to
appoint by writing a new trustee or trustees in place of
the trustee or trustees so dying resigning removed or be-
coming unfit or incapable to act as aforesaid. And upon
every such appointment the number of trustees may be
increased or diminished but not to less than two. And
upon every such appointment such instruments shall be
executed as shall be necessary or convenient for vesting the
trust premises in the trustees or trustee for the time being
or for providing evidence of such vesting independently of
such appointment.

8. The Shareholders shall have power at any time or times
to increase or reduce the number of Trustees (but they shall
not reduce the number of Trustees to less than three) and to
accept the resignation of any Trustee and to appoint any
additional Trustee or Trustees.

9. The receipts of the Trustees or either or any of them or
their agents in that behalf for moneys or things paid or de-
livered to them or him shall be effectual discharges to the
persons paying or delivering the same therefrom and from
all liability to see to the application thereof. And no pur-
chaser or person dealing with the Trustees shall be bound to
ascertain or inquire whether any resolution of the Sharehold-
ers as is herein required or provided for has been obtained or
passed or as to the existence or occurrence of any event or
purpose in or for which a sale mortgage pledge or charge is
herein authorized or directed or otherwise as to the purpose
or regularity of any of the acts of the Trustees purporting to
be done in pursuance of any of the provisions or powers

405

APPENDIX OF FORMS

herein contained or as to the regularity of the discharge
resignation or appointment of any Trustee and a transfer of
the trust premises or any part thereof executed by the
Trustee or Trustees in whom the same shall be vested at the
time of any such discharge resignation or appointment for
the purpose of vesting the same in the trustees for the time
being of these presents or providmg evidence of such vest-
ing independently of such discharge resignation or appoint-
ment shall as to the property comprised in such transfer
be conclusive evidence in favor of any such purchaser or
other person dealing with the Trustees of the matters therein
recited relating to such discharge resignation or appoint-
ment or the occasion thereof or the occasion of such transfer.
And no purchaser or person dealing with any Trustee pur-
porting to act during the absence unfitness or incapacity of
any other Trustee or under any delegation of authority from
any other Trustee shall be concerned to ascertain or inquire
whether an occasion exists in which he is authorized so to
act or in which such delegation is permitted or whether such
delegated authority is still subsisting.

10. The Trustees shall not be liable for anything done or
omitted by them in good faith and shall be answerable and
accountable only for their own acts receipts neglects and
defaults respectively and not for those of each other or any
agent employed by them nor for any bank trust company
broker or other person with whom or into whose hands any
moneys or securities may be deposited or come nor for any
defect in title of any property or securities acquired nor for
any loss unless it shall happen through their own default
respectively.' And no Trustee however appointed shall be
obliged to give any bond or surety or other security for the
performance of any of his duties in the said trusts.

Duration of the Trusts

11. The trusts contained in these presents shall continue
in such manner that the Trustees shall have all the powers
and discretions expressed to be given to them respectively
by these presents and that no Shareholder shall be entitled
to put an end to the same or to require a division of the trust
pr(!mises or any part thereof except as herein provided until
the expiration of seventy-five years from the date hereof or

406

BLANK HOTEL TRUST

the expiration of twenty-one years from the death of the

last survivor of the said and such other persons

now living as shall hereafter become trustees of these
presents before any person or persons not now living
shall have become the only trustee or trustees thereof or
the offices of trustees thereof shall have become entirely
vacant whichever of the said periods shall first expire and
at the expiration of the time so limited the said trusts shall
terminate.

12. Upon the termination of the said trusts by the said
limitation or under the provisions hereinafter contained
the Trustees shall sell and convert into money the whole of
the trust premises and shall apportion the proceeds thereof
among the Shareholders ratably according to the number of
the said shares held by them respectively subject to the
preferences provided for the holders of preferred shares.

Income

13. The Trustees shall from time to time set apart out of
the income of the trust premises as and for a surplus fund
such sums if any as they may think proper. And the said
surplus fund shall be applicable during the continuance of
the said trusts to any purposes to which money forming
part of the capital or income of the trust premises may be
applied including the payment of future dividends.

14. Out of the residue of the income of the trust premises
and of such part or parts if any of the surplus fund as the
Trustees may think proper the Trustees may declare divi-
dends among the Shareholders according to the number of
shares held by them and the priorities attached to such
shares respectively payable at such times as may be fixed
by the Trustees. And the Trustees shall appropriate suf-
ficient sums for the payment of the dividends so declared
and shall pay the said dividends to the Shareholders at the
time and in the manner so appointed. And the Shareholders
shall have no right to any dividends except when and as de-
clared by the Trustees.

15. The Trustees may determine the time of the com-
mencement of the financial year and from time to time
change the same. And until they shall change the same the
financial year shall commence on the 1st of October in each

407

APPENDIX OF FORMS

year. In case the Trustees shall change the time of the
commencement of the financial year and for the period pre-
ceding the first financial year they shall make proportionate
adjustments of the income expenses taxes outgoings and
dividends as they shall consider proper on account of the
change. And taxes assessed on or after the 1st of April and
before the 1st of October in the present or any subsequent
calendar year shall for the purposes of these presents be
treated as if they were assessed on the 1st of October so far
as conveniently practicable.

Shares

16. The beneficial interest of the Shareholders in the
trust premises shall be divided into 3500 preferred shares
of the nominal value of $100 each and 7000 common shares
of the nominal value of $1 each all of which shall be issued

by the Trustees to the said

fully paid up for the property so transferred by them to the
Trustees or intended so to be as aforesaid.

17. The holders of the preferred shares shall be entitled
to dividends out of the income of the said trusts at the rate
of 7 (seven) per cent per annum upon the nominal value of
their shares from the date hereof during the continuance of
the said trusts in priority to the holders of the common shares
which dividends shall be cumulative until they shall have
been declared and paid at the said rate for the whole of the
said period and the preferred shares shall not entitle the
holders thereof to any further dividends out of the income.
And the Trustees upon declaring any dividend upon the
preferred shares shall appropriate sufficient funds for the
payment of such dividend and shall pay the same to the
preferred shareholders at the time appointed.

18. The rest of the income not required for the said divi-
dends upon the preferred shares shall be applicable by the
Trustees to dividends upon the common shares. And the
Trustees may declare such dividends upon the common
shares out of the income at any time when a dividend or
dividends shall have been declared on the preferred shares
at the rate of 7 (seven) per cent down to that time and paid
to holders thereof or provided for by the appropriation of
sufficient funds for that purpose.

408

BLANK HOTEL TRUST

19. Upon the termination of the said trusts the preferred
shareholders shall be entitled to receive out of the proceeds
of the trust premises the sum of $100 (one hundred dollars)
for each of the preferred shares together with any unpaid
dividends to which they would be entitled if the said trusts
had continued down to the completion of the sale of the
trust premises or in case of the insufficiency of the said pro-
ceeds for such payments the same shall be apportioned
ratably among the preferred shares. And any surplus of the
said proceeds shall be apportioned among the holders of the
common shares ratably according to the number of the said
shares held by them respectively.

20, New shares in addition to those above mentioned
may be issued by the Trustees with the sanction of a resolu-
tion of the holders of two thirds of all the shares.

21. Such new shares shall be of the same nominal value
as the original preferred shares and may in accordance with
any directions given by the Shareholders in any such resolu-
tion or if no such directions be given in the discretion of the
Trustees be issued as preferred or common shares ranking
pari passu with any of the preferred or common shares pre-
viously issued or with any right of preference as to dividend
or capital or both or with any other special privilege or ad-
vantage or with any deferred rights as compared with any
shares previously issued or then about to be issued.

22, All new shares may be issued either for money or
property and if issued for money may be issued fully paid
up upon the payment to the Trustees of such sum as they
shall determine. And if any new shares are issued for the
whole or any part of the price agreed upon for any prop-
erty they may be issued fully paid up upon the transfer of
such property to the Trustees.

23, Any new shares whether issued for money or prop-
erty may be issued without offering the same to the exist-
ing Shareholders or any of them.

24. A register or registers shall be kept by or under the
direction of the Trustees which shall contain the names and
addresses of the Shareholders and the number of shares
held by them respectively and of all future transfers thereof.
No Shareholder shall be entitled to have any notice given
to him as herein provided until he has given his address to
the Trustees to be entered in the register.

409

APPENDIX OF FORMS

25. The Trustees shall have power to employ some in-
corporated trust compgmy in the city of Boston as transfer
agent or registrar to keep the said registers and to record
therein the transfers of any of the said shares and to register
certificates of shares issued by the Trustees to the persons
entitled to the same after any transfers of such shares or
otherwise. And the remuneration of such transfer agent or
registrar shall be allowed as part of the expenses incidental
to the execution of the said trusts.

26. Everi' Shareholder shall be entitled to receive from
the Trustees a certificate signed by the president and the
secretary or an assistant secretary' substantially in one of
the forms contained in the Second Schedule hereto speci-
f}-ing the number of shares held by him with such descrip-
tion if any as may be necessarA- to distinguish them from
other shares to which different rights are attached and even,'
certificate of shares shall be registered by the transfer agent
or registrar if any and have on it a certificate of such transfer
agent or registrar that it has been so registered.

27. If any certificate is worn out or defaced the Trustees
may upon surrender thereof for cancellation issue a new
certificate in place thereof. And on evidence satisfactory^
to the Trustees that any certificate has been lost or destroyed
and on such terms if an}- as to indemnity and otherwise as
they shall deem proper the Trustees may issue a new cer-
tificate in place thereof.

28. Ever}' transfer of an}* share (otherwise than by opera-
tion of law) shaU be in writing under the hand of the trans-
feror and upon dehver}- thereof with the existing certificate
for such share to the Trustees or their, transfer agent shall
be recorded in the register and a new certificate therefor
shall be given to the transferee and iu case of a transfer of
only a part of the shares mentioned in an}' certificate a new
certificate for the residue thereof shall be given to the trans-
feror. UntU the transfer shall be so dehvered and recorded
the transferor shall be deemed to be the holder of the share
or shares comprised therein for aU the purposes hereof and the
Trustees shall not be affected by any notice of the transfer.

29. Any person becoming entitled to any share in conse-
quence of the death bankrupcty or insolvency of any Share-
holder or in any way other than by a transfer in accordance

410

BLANK HOTEL TRUST

with the preceding paragraph shall be recorded in the register
as the holder of the said share and receive a new certificate
for the same upon production of the proper evidence thereof
and delivery of the existing certificate to the Trustees or
their transfer agent or registrar.

30. Shares shall be personal property entitling the Share-
holders only to the rights and interests in the granted prem-
ises set forth in these presents.

31. Two or more persons holding any share shall be joint
tenants of the entire interest therein and no entry shall be
made in the register or in any certificate that any person
is entitled to any future limited or contingent interest in
any share. But any person registered as the holder of any
share may subject to the provisions hereinafter contained
be described therein as a trustee of any land and any words
may be added to the description to identify the trust.

32. The Trustees shall not nor shall the Shareholders or
any transfer agent or registrar or other agent of the Trustees
be bound to take notice or be affected by notice of any trust
whether express implied or constructive or any charge or
equity to which any of the said shares or the interests of any
of the Shareholders in the trusts of these presents may be
subject or to ascertain or inquire whether any sale or
transfer of any such share or interest by any such Share-
holder or his personal representatives is authorized by such
trust charge or equity or to recognize any person as having
any interest therein except the persons registered as such
Shareholders. And the receipt of the person in whose name
any share is registered or if such share is registered in the
names of more than one person the receipt of any one of
such persons shall be a sufficient discharge for all dividends
and other moneys payable in respect of such share and from
all liabihty to see to the application thereof.

Share Warrants

33. Upon the request in writing of the person registered
as the holder of any shares and upon surrender and cancella-
tion of the certificate for the same the Trustees shall issue
a warrant (hereinafter called a share warrant) for the same
number of shares substantially in the form contained in
the Second Schedule hereto stating that the bearer is en-

411

APPENDIX OF FORMS

titled to the shares therein specified and may provide by
coupons or otherwise for the pajinent of future dividends
on such shares.

34. Coupons payable to bearer of such number as the
Trustees shall think proper shall be attached to share war-
rants pro\dding for the pajTnent of dividends upon the
shares included therein and the Trustees shall provide as
they see fit for the issue of fresh coupons to the bearers for
the time being of share warrants when the coupons attached
thereto shall have been exhausted.

35. The surrender and cancellation of any certificate of
shares shall be entered in the register and aU share warrants
issued and all coupons attached thereto or otherwise issued
shall be registered by the transfer agent or registrar if any
and every share warrant shall have on it a certificate of
such agent or registrar that it has been so registered.

36. The coupons shall bear the number of the share war-
rant to which they belong and shall also be distinguished by
numbers showing their place respectively in the series of
coupons to wliich they belong but they shall not be expressed
to be payable at any particular time and shall not contain
any statement as to the amount which shall be payable.

37. "V\Tien any di\'idend is declared upon the shares in-
cluded in any share warrant the Trustees shall publish an
advertisement in one daily newspaper pubhshed in Boston
and in such other newspapers if any as they shall think proper
stating the amount payable on each share and the time and
place of payment and the serial number of the coupon to
be presented. And any person presenting and dehvering
up a coupon of that number at the place specified in the
coupon or in the advertisement shall be entitled to receive
the dividend so declared upon the shares included m the
share warrant to which the coupon belongs.

38. The Trustees shall be entitled to treat the bearer of
any share warrant or coupon as absolutely entitled to the
shares or dividend therein specified.

39. If any share warrant or coupon is worn out or defaced
the Trustees may upon surrender thereof for cancellation
issue a now one in its place. And on evidence satisfactory
to the Trustees that any share warrant or coupon has been
lost or destroyed and on such terms if any as to indemnity

412

BLANK HOTEL TRUST

and otherwise as they shall deem proper the Trustees may-
issue a new one in place thereof.

40. A person shall not be entitled as the bearer of a share
warrant to attend or vote or exercise any of the rights of
a shareholder in respect thereof at a meeting of the Share-
holders or to sign any request for any such meeting unless
three days at least before the day of the meeting in the former
case or unless before the delivery of the request in the latter
case the share warrant shall have been deposited at the
office where the register of the Shareholders is kept or such
other place as the Trustees appoint with a statement in writ-
ing of his name and address and shall remain so deposited
until after the meeting and for this purpose the name of only
one holder of a share warrant shall be given or received.

41. The person so depositing any share warrant shall
receive a certificate stating his name and address and the
number of shares included in such share warrant and such
certificate shall entitle him to attend and vote in person or
by proxy and exercise the rights of a shareholder at a meet-
ing in the same way as if he were a registered holder of the
shares specified in such certificate. And upon the surren-
der of such certificate the share warrant in respect of which
it shall have been given shall be returned.

42. Holders of share warrants shall not be entitled to
notice of any meeting of the Shareholders.

43. A person shall not be entitled as bearer of a share war-
rant to exercise any of the rights of a member except as
hereinbefore provided without producing such warrant and
stating his name and address and if and when the Trustees
so require permitting an indorsement to be made thereon
of the fact date purpose and consequence of its production.

44. Subject to the provisions herein contained the bearer
of a share warrant shall be deemed a Shareholder in respect
of the shares specified in such warrant and shall have all
the rights of a Shareholder in connection therewith.

45. The bearer of a share warrant upon surrendering it
to be cancelled with a request in writing signed by him in
such form as the Trustees require that he be registered as a
Shareholder in respect of the shares included in such war-
rant and stating therein his name and address shall be
entered in the register as a Shareholder accordingly.

413

APPENDIX OF FORMS

Meetings of the Shareholders

46. An annual meeting of the Shareholders shall be held
on the second Tuesday of February in every year after the
present year at such time and place in the city of Boston as
the Trustees shall appoint at which meeting the Trustees
shall lay before the Shareholders an account of the receipts
and expenditures and income account of the trusts hereof
from the foot of the last previous account down to the end
of the last financial year preceding such meeting and a re-
port shall be laid before them by the Trustee whenever they
think there is any matter of special interest or importance
calling for such report.

47. At the annual meeting the accounts may be approved
after such consideration as the Shareholders think proper
and any other business may be considered or transacted
that shall be specified in the notice of the meeting.

48. The Trustees may whenever they think fit and shall
upon the written request of the holders of one quarter of all
the said shares at the time outstanding call a special meet-
ing of the Shareholders in the city of Boston. Every such
reciuest shall express the purpose of the meeting and shall
be dehvered to the Trustees or one of them addressed in the
words ''To the Trustees of the Blank Hotel Trust." And
in case the Trustees shall refuse or neglect for seven days
after the request shall have been so delivered to call such
special meeting to be held within twenty-one daj^s after
the delivery of the request the same may be called by the
person or persons signing such request or by any three of
them. And a special meeting may also be called by the
holders of one quarter of the said shares whenever the ofl&ces
of the Trustees shall be entirely vacant.

49. The president of the Trustees shall be entitled to pre-
side at every meeting of the Shareholders but if he is not
present at the commencement of the meeting or being present
shall not be willing to preside the Shareholders present shall
choose any other shareholder to preside as chairman of
such meeting.

50. At a special meeting no business or resolution shall
be considered or passed other than such as is included in
the purposes for which the meeting is called.

414

BLANK HOTEL TRUST

51. Notices of the annual meetings and of special meet-
ings shall be given in writing by the secretary or by order
of the Trustees or in case of a special meeting by the persons
calling the same to each of the Shareholders as hereinafter
provided and if any share warrants have been issued by
advertisement ten days at least before such meeting and
shall specify the time and place thereof and in the case of a
special meeting the purposes thereof.

52. At all meetings every Shareholder shall have one vote
for every share held by him of the nominal value of SI 00
(one hundred dollars) and fractional votes proportionately
for shares held by him of a less nominal value and may vote
either in person or by proxy appointed by writing under
the hand of the appointer or in the case of a corporation
under its seal and the holders of a majority in nominal
value of all the shares shall constitute a quorum for the
transaction of business.

53. For the purpose of determining the Shareholders
who are entitled to vote at any meeting the Trustees may
fix a day not more than twenty-one days before the day of
such meeting and in such case only the Shareholders regis-
tered on such day shall be entitled to vote at such meeting
on the shares included in such certificate.

54. When any share is held jointly by several persons any
one of them may vote at any meeting in person or by proxy
in respect of such share but if more than one of them shall
be present at such meeting in person or by proxy no vote
shall be received in respect of such share unless the persons
so present join in or assent to such vote.

55. If the holder of any share is a minor or a person of
unsound mind or subject to guardianship or to the legal
control of any other person as regards the charge or manage-
ment of such share he may vote by his guardian or such
other person appointed or having such contiol and such vote
may be given in person or by proxy.

56. If at the expiration of half an hour from the time ap-
pointed for a meeting a quorum is not present the meeting
shall be dissolved if called at the request of Shareholders or
by Shareholders after such request as hereinbefore provided
but in other cases the Shareholders present in person or by
proxy shall constitute a quorum for the purpose of adjourn-

415

APPENDIX OF FORMS

ing the meeting but not for the transaction of any other
business.

57. Except as otherwise herein provided any resolution
carried by majority of the votes given at any meeting
shall be binding and in' case of an equality of votes the
chairman of the meeting shall have an additional or casting
vote.

58. The Shareholders may by a resolution passed by the
votes of the holders of three fourths of all the shares remove
any Trustee or terminate these presents at an earlier time
than that hereinbefore limited for that purpose or make
any alteration in the terms powers and provisions herein
contained but so that no such alteration shall affect the rela-
tive rights of the holders of the preferred and of the common
shares though it may provide for the reduction of the num-
ber of the shares of any class and so that no alteration shall
affect any purchaser or person dealing with the Trustees
except so far as he shall have actual notice thereof or as it
shall be set out in a certificate of the president and the secre-
tary or assistant secretary recorded in the registry of deeds
for the county of Suffolk.

59. Every notice to the Shareholders required or pro-
vided for in these presents may be given to them personally
or by sending it to them through the post-office in a pre-
paid letter addressed to each of them respectively at his
address specified in the register and posted in the city of
Boston and shall be deemed to have been given at the time
when it is so posted. But in respect of any share held jointly
by several persons notice so given to whichever of them is
first named in the register shall be sufficient notice to all of
them. And any notice so sent to the registered address of
any shareholder shall be deemed to have been duly sent in
respect of any such share whether held by him solely or
jointly with others notwithstanding he be then deceased
and whether the Trustees or any person sending such notice
have knowledge or not of his death until some other person
or persons shall be registered as holders. And the certifi-
cate of the person or persons giving such notice shall be
sufficient evidence thereof and shall protect all persons act-
ing in good faith in reliance on such certificate. Any
notice herein required to be given by advertisement shall
be given by publishing the same once in one daily news-

410

BLANK HOTEL TRUST

paper published in Boston and in such other newspapers
if any as the person or persons giving such notice shall
think proper.

Proceedings of the Trustees

60. The Trustees may meet together for the transaction
of business and regulate their meetings as they think proper
and they may prescribe the times and places of regular
meetings of the Trustees which may be held without any
further notice thereof. The Trustees may make alter and
amend by-laws regulating their conduct and meetings and
the management of the undertaking not inconsistent with
the terms or provisions of these presents.

61. The quorum necessary for the transaction of business
at a meeting of the Trustees shall be three Trustees present
personally or by proxy of whom at least two shall be present
personally. Such quorum shall have full power to exercise
all or any of the powers authorities and discretions for the
time being vested in the Trustees.

62. The president of two Trustees may at any time sum-
mon a special meeting of the Trustees by giving to each of
the other Trustees three days' notice of such meeting and
a notice thereof sent through the post-office in a prepaid
letter addressed to any Trustee at his usual address and
posted in the city of Boston on the fifth or any earher day
before such meeting shall be deemed sufficient notice to
such Trustee whether the same shall be received by him or
not and in computing any such time Sundays and holidays
shall be included. But if any Trustee shall be out of Massa-
chusetts New York Connecticut and Rhode Island it
shall not be necessary to give him any notice of such meet-
ing. And any Trustee may waive notice of a meeting either
before or after such meeting.

63. A Trustee may from time to time in writing appoint
another Trustee as his proxy to vote at any meeting of the
Trustees.

64. Questions arising at any meeting of the Trustees shall
be decided by a majority of the votes of the Trustees present
personally or by proxy and in case of an equahty of votes
the chairman of the meeting shall have a second or casting
vote.

417

APPENDIX OF FORMS

65. The Trustees from time to time shall elect a president
a secretary and a treasurer who may or may not be elected
from among the Trustees and shall have such authority and
perform such duties as may from time to time be deter-
mined by the Trustees and any two or more of the said
offices may be held by the same person,

66. The action of the Trustees in respect of any matter
may be testified by a resolution passed by them at a meet-
ing or by a writing signed by a majority of them.

67. A resolution in writing signed by a majority of the
Trustees shall be as valid for all purposes as a resolution
passed at a meeting of the Trustees.

68. A certificate signed by the president or secretary shall
in favor of the Trustees and all other persons acting in good
faith in reliance thereon be conclusive evidence of the con-
tents of any resolution or action of the Trustees and of all
matters in such certificate contained relating to the same
or to the regularity thereof and the passage of such resolu-
tion or the taking of such action and no person shall be
obliged to make any inquiry as to any of the said matters
or as to the election or appointment of any person acting
as a Trustee or be affected by actual or implied notice of
any irregularity therein.

69. The Trustees shall cause to be kept in books provided
for the purpose minutes of all resolutions and proceedings
of the Trustees and of the names of the Trustees present at
every meeting specifying whether they were present in
person or by proxy and minutes of all resolutions and pro-
ceedings of all meetings of the Shareholders. And such
minutes if purporting to be signed by the president or
secretary or an assistant secretary shall be evidence of the
matters therein stated and of the regularity of the meet-
ing and that proper notice of the meeting was given if any
was required in favor of the Trustees and all persons acting
thereon in good faith of all such matters and things therein
stated.

Miscellaneous Provisions

70. From and after the execution of these presents as to
any und all of the real estate and other property specified

418

BLANK HOTEL TRUST

in the First Schedule hereto that may not have been effec-
tually and perfectly vested in the Trustees as hereinbefore
provided until the same shall have been so vested in them

the said shall hold the same upon trust for

transfer thereof to the Trustees in such manner as aforesaid
and subject thereto shall hold the same upon the trusts
herein contained concerning the same as if the same had
been so transferred.

71. The trusts of these presents may be collectively desig-
nated for all the purposes thereof as the Blank Hotel
Trust and under that name so far as practicable all business
shall be conducted by the Trustees.

72. In the construction of these presents words in the
singular number include the plural number and vice versa
and words denoting males include females and words de-
noting persons include firms associations and corporations
unless a contrary intention is to be inferred from the sub-
ject matter or context. And all the trusts powers and pro-
visions herein contained shall take effect and be construed
according to the law of Massachusetts.

73. The headings of different parts of these presents and
the marginal notes are inserted for convenience of reference
and are not to be taken to be any part of these presents or
to control or affect the meaning construction or effect of
the same.

74. The terms and provisions of these presents may be
amended or changed in any manner or to any extent with
the concurrence in writing or by vote at a meeting of the
holders of three fourths in nominal value of all the shares
then outstanding but not so as to affect the validity or effect
of anything previously done by the Trustees or Shareholders
hereunder.

In witness whereof the parties hereto have set their hands
and seals at Boston in the State of Massachusetts the day
and year first above written.

First Schedule
(omitted)

419

.APPENDIX OF FORMS

Second Schedule

(1) Form of Certificate of Shares

Blank Hotel Trust
No Shares.

This is to certify that is the holder

of preferred (or common) shares full paid and

non-assessable in the Blank Hotel Trust the said shares
being issued received and held under and subject to the

p^o^^sions of the indenture dated 1912

establishing the Blank Hotel Trust which is deposited with
the Blank Trust Company in Boston

This certificate is not valid unless registered by the transfer
agent and the shares specified herein are transferable by
^^Titing signed by the holder and registered in the books of
the Blank HotelTrust.

Witness the signatures of the president and the secretary or
assistant secretary of the Blank Hotel Trust the

President.

Registered Secretary.

Blank Trust Company, Transfer Agent.

By

Assistant Secretary.

Transfer Clerk.

Form of Transfer Indorsed on Certificate
For value received the imdersigned the holder of the pre-
ferred (or common) shares in the Blank Hotel Trust
specified in the within certificate hereby assigns and trans-
fers unto of the said shares

mentioned in the within certificate.

Dated 19....

Witness

Notice
Transfers will be registered and new certificates issued to the
transferees upon the delivery of transfers to the transfer agent
accompanied by this certificate. The signature on the transfer
should correspond in every particular wdth the name of the
holder as written in the certificate without enlargement or dim-
inution or other change.

420

BLANK HOTEL TRUST

(2) Form of Share Warrant

Blank Hotel Trust

No Shares.

This is to certify that the bearer of this warrant is entitled

to fully paid up preferred (or common) shares

in the Blank Hotel Trust subject to the provisions of

the indenture dated 1912 establishing the

Blank Hotel Trust which is deposited with the Blank Trust
Company in Boston.

This certificate is not valid unless registered by the transfer
agent.

Witness the signatures of the president and the secretary
or assistant secretary of the Blank Hotel Trust the

President.

Secretary.
Registered

Blank Trust Company, Transfer Agent.

By

Assistant Secretary.

Transfer Clerk.

Form of Coupon

Blank Hotel Trust
Dividend coupon No

On preferred (or common) shares of Blank Hotel

Trust included in the share warrant numbered as below
payable at a time and place to be fixed by advertisement.

No

Secretary.

i

421

APPENDIX OF FORMS

(3) Form of Certificate of Deposit

Blank Hotel Trust
No

This is to certify that has in accordance

with the provisions of the indenture of trust by which the
said undertaking was estabhshed deposited the undermen-
tioned share warrants in respect of which he is entitled to
attend the meeting of the shareholders of Blank Hotel Trust
to be held on the

No. of share warrant .... shares represented .... cou-
pons attached ....

Witness the signature of the secretary or assistant secre-
tary of Blank Hotel Trust the

Secretary.
Registered

Blank Trust Company, Transfer Agent.

By

Assistant Secretary.

Transfer Clerk.

Mortgage Bond

$1000 No

Blank Hotel Trust

established by an indenture of trust dated the .... of

and deposited with the Blank Trust Company

at Boston.

Be it knoAvn that the Trustees of the Blank Hotel Trust above
mentioned for value received promise to pay to the bearer
hereof the sum of one thousand dollars out of the real and
personal property for the time being subject to the trusts

of the said indenture on the 1st day of 19. . . with

interest at the rate of . . . per cent per annum payable semi-
annually to the bearers of the respective interest warrants
therefor hereto annexed upon presentation thereof both
princijjal and interest being payable at the office of the said
Jilatik Trust Company. And so that the payment of the
said principal and interest shall be a floating charge upon

422

BLANK HOTEL TRUST

the said property as provided in the said indenture and the
said Trustees and the Shareholders in the said trusts or any
of them shall not be personally liable for such payment.

This obligation is one of a series of bonds secured by a
mortgage dated the day of 1912 whereby

This obligation is valid only when the Blank Trust Com-
pany has indorsed hereon its certificate that it is one of the
bonds specified in the said mortgage.

In witness whereof the said Trustees have hereto set their
seals using for that purpose the same seal and caused these
presents to be signed by their president and treasurer the
day of 1912.

President.
Treasurer.

(Interest Warrant)

(Certificate of the Blank Trust Co.)

423

I

NORTH AMERICAN COMPANIES

Agreement and Declara.tion of Trust

Agreement made at Boston in the Commonwealth of
Massachusetts and dated May fifth, 1915 by and between D.,
T. and C. parties of the first part, W. residing at B. Massa-
chusetts and H. residing at S. JVIassachusetts (who and their
successors are hereinafter collectively called the Trustees)
parties of the second part and the Holders from time to
time of Certificates for Preferred and Common Shares
herein provided for (hereinafter called the Shareholders)
parties of the third part.

TMiereas the parties of the first part have entered into
an agreement in writing (hereinafter called the Preliminary
Agreement) dated May fourth, 1915 agreeing among other
things respectively to sell, assign, transfer and deliver unto
the Trustees the shares of stock by the terms hereof sold,
assigned, transferred and delivered unto the Trustees upon
receiving from the Trustees shares issued hereunder to the
aggregate amount of 935300 Dollars in amount or par value
of preferred shares and 558000 common shares without
nominal or par value and upon the execution and delivery
by the Trustees of the agreements therein referred to. Said
Preliminary Agreement is on file with the Trustees and this
agreement and declaration of trust is expressly made in
pursuance thereof subject to all the terms thereof and the
Shareholders hereby and by their acceptance of shares here-
under expressly assent to all the terms thereof.

Now therefore this Agreement Witnesseth

1. The said D. has sold, assigned, transferred and delivered
and Vjy these presents docs sell, assign, transfer and deliver
unto the Trustees and their successors and assigns 27853
shares of the common capital stock of the C. Company, a

424

NORTH AMERICAN COMPANIES

corporation organized and existing under the Laws of the
Province of Quebec, Dominion of Canada, and agrees that
he will sell, assign, transfer and deliver unto the Trustees
any and all additional shares of the capital stock of the said
company which may at any time hereafter be acquired by
him upon receiving for each such additional share one pre-
ferred share issued hereunder and the Trustees agree to
accept upon the said terms such additional shares as he may
deliver to them up to the amount of stock in the C.
Company now outstanding. The said T. has sold, assigned,
transferred and delivered and by these presents does sell,
assign, transfer and deliver unto the Trustees and their suc-
cessors and assigns thirty-six thousand (36,000) shares of
the capital stock of the S. Company, a corporation organized
and existing under the laws of the State of New York. The
said C. has sold, assigned, transferred and delivered and by
these presents does sell, assign, transfer and deliver unto
the Trustees and their successors and assigns (2500) shares
of the preferred capital stock and (3000) shares of the com-
mon capital stock of T. Company, a corporation organized
and existing imder the laws of the State of New York, and
agrees that he will sell, assign, transfer and deliver unto the
Trustees all additional common and preferred shares of the
capital stock of the said Company which may at any time
hereafter be acquired by him upon receiving for each such
additional share of preferred stock one preferred share issued
hereunder and for each such additional share of common
stock one common share issued hereunder and the Trustees
agree to accept upon the said terms such additional shares
as he may deliver to them up to the amoimt of stock in the
T. Company now outstanding,

2. In consideration of the aforesaid assignments and
agreements the Trustees (as Trustees and not individuals)
will forthwith issue and deliver to the parties of the first part
935300 dollars in amount or par value of the preferred shares
and 558000 of the common shares herein provided to be
issued by them, and will forthwith execute and deliver a
contract with S. Securities Corporation for the acquisition
of four thousand (4000) additional shares of S. Company
and will forthwith enter into an agreement for the sale to the
Syndicate formed as set forth in the Preliminary Agreement
of two hundred and twenty thousand (220,000) common

425

APPENDIX OF FORMS

shares to be issued hereunder, and forthwith execute and
deUver an option agreement for the issue of two hundred
and twenty thousand (220,000) additional common shares
hereunder, all as provided for in the Preliminary Agreement.

3. The Trustees hereby declare and agree that they will
hold all the said shares of stock acquired and to be acquired
by them and all other property which they may acquire as
such Trustees (hereinafter called the trust estate) in trust,
to hold and manage the same for the benefit of the share-
holders for the time being according to the number and class
of shares issued and held by them respectively and with and
subject to the powers and provisions hereinafter set forth
concerning the same.

The Trustees

4. The Trustees shall hold the legal title to the trust
estate and in addition to the other rights, privileges, au-
thority and power vested in them by law and hereby con-
ferred upon them, they shall have power subject to the limi-
tations and conditions of these presents;

(a) To manage and control the trust estate;

(6) To transfer and to sell, lease, dispose of or otherwise
turn to account all or any part of the trust estate to any cor-
poration, person or persons upon such terms as the Trustees
may determine except that the Trustee shall not except
upon the termination 6f the trust hereby created in the
manner hereinafter provided sell or dispose of any shares of
the C. Company nor any shares of the S. Company nor any
shares of the T. Company, nor any shares of any corpora-
tion of whose capital stock the greater part is or shall be
held by the trustees without the assent by vote of the holders
of a majority of the outstanding shares issued hereunder
given at a regular annual meeting or at a special meeting
called for the purpose of considering the sale or disposition
of such shares;

(c) To acquire any real or personal property, rights,
franchises or privileges which they may think suitable or
convenient for any purposes of the undertaking;

(d) To vote in person or by proxy at any and all meetings
general or special of stockholders or holders of other securi-
ties upon all shares of stock or other securities held hereunder

42G

NORTH AMERICAN COMPANIES

and on any and all matters coming before said meetings,
including the right to vote in favor of the creation of any
mortgage lien or other encumbrance upon any of the prop-
erty, real or personal, of any or all of the corporations any
of whose shares of stock may at the time be comprised in
the trust estate, and the right to vote in favor of consolidat-
ing or merging any of the corporations any of whose shares
of stock may be comprised in the trust estate with any other
such corporation or with any other corporation, and the
right to vote in favor of the sale or lease of the physical
property, real or personal, or any part thereof of any such
corporation to any other corporation whatsoever now exist-
ing or hereafter created or to any voluntary association or
trustees or persons having lawful power to acquire or to be-
come lessees of such property, and the right to vote in favor
of or to consent to any proposition, resolution or motion to
amend, alter, repeal or modify any of the provisions of the
articles of association, certificate of incorporation, charter
and by-laws of any corporation any of whose shares of stock
may be comprised in the trust estate, provided however that
neither the right hereunder to vote in favor of the creation
of any such mortgage lien or other encumbrance, nor the
right to vote in favor of any such consolidating or merging,
nor the right to vote in favor of any such sale or lease, nor
the right to vote in favor of or to consent to any such propo-
sition, resolution or motion to amend, alter, repeal or modify
any of the provisions of the articles of association, certificate
of incorporation, charter or by-laws of any corporation any
of whose shares of stock may be comprised in the trust estate
shall be exercised without the assent by vote of the holders
of a majority of the outstanding shares issued hereunder
given at a meeting of the shareholders and in case of any
such consolidation, merger or sale to accept and receive in
payment or in exchange for the interest of the trust estate
in the premises howsoever represented the evidences of debt,
bonds, notes, shares of stock, participation shares, trust cer-
tificates, certificates of interest or other security made or
issued by one or more corporations, voluntary associations,
trustees or persons as the Trustees may in their absolute
and uncontrolled discretion deem to be proper;

(e) To transfer to any person or persons any share or
shares of stock in any corporation that may at the time con-

427

APPENDIX OF FORMS

stitute a part of the trust estate, and to allow any such share
or shares of stock to stand in the name or names of such per-
sons as long as the Trustees shall thmk proper for the pur-
pose of qualifying such person or persons as a director or
directors or other officer of such corporation or otherwise for
the purpose of maintaining the organization of such cor-
poration, or for any other purpose deemed expedient by the
Trustees;

(/) To cause any shares, bonds or securities at the time
forming any part of the trust estate to be transferred into
the names of or vested in the Trustees or any of them
jointly with the right of sur^^vorship or in anj" one of them
in such manner as not to give notice that they are Trustees
thereof or that the same are affected by any trust, or to
aUow or cause such shares, bonds or securities to remain in
or to be transferred to the name or names of any other per-
son, firm or corporation and to entrust to any bank or trust
company or safe deposit company for safe keeping any or
aU of the certificates of stock, bonds, securities, claims and
aU documents and papers comprised in or relating to the
trust estate;

(g) To sell or exchange subject to the Kmitations in (b)
above on such terms and for such considerations whether
cash or other securities as they may see fit, bonds, securities
and other claims held by them of or against any corpora-
tion, for such bonds, notes, shares of stock, participation
shares, trust certificates, certificates of interest or other
securities made or issued by one or more corporations,
voluntarj^ associations, trustees or persons as the Trustees
may in their absolute and uncontrolled discretion deem to
be proper;

(h) To settle all accounts, and to compound, compromise,
abandon or adjust by arbitration or otherwise any suits,
actions, proceedings, cUsputes, claims, demands and things
relating to the trust estate, and to transfer to and deposit
with any incorporated trust company or other persons any
shares or securities forming part of the trust estate for the
purposes of any arrangement for enforcing or protecting the
interests of the Trustees or the owners of such shares or
securities and to give time with or without security for the
payment or delivery of any debts or property claimed in
favor of the trust estate, and to pay or satisfy any debts

428

NORTH AMERICAN COMPANIES

or claims upon any evidence that the Trustees may deem
sufficient;

(i) To lend any money forming part of the trust estate
from time to time on such terms and conditions and with or
without security to any of the corporations of whose capital
stock the greater part is or shall be held by the Trustees or to
such persons or other corporations as the Trustees may ap-
prove, and to sell or otherwise dispose of and to pledge or
hypothecate any bonds, notes or other evidences of indebted-
ness given for or on account of any such loans and to pay,
liquidate, settle or discharge any debts, claims or demands of
any sort now or hereafter existing against any corporation of
whose capital stock the greater part is or shall be held by
the Trustees;

(j) To invest or deal with the moneys forming part of
the trust estate upon such securities or in such manner as
they may from time to time determine in the same manner
and to the same extent as if they were not Trustees but were
making such investments as natural persons and without any
limitation in respect of the character of the securities in-
vested in, and to sell or otherwise dispose of any of such
investments and reinvest the proceeds thereof, or any part
thereof, with continuing power so to invest and reinvest
during the existence of the trust hereby created;

(k) By unanimous action of the Trustees to raise or secure
the payment of money from time to time for the purposes
of the said trusts and to issue evidences thereof, and for such
purpose to mortgage, pledge or otherwise encumber the
whole or any part of the trust estate all upon such terms and
conditions and for such purposes and in such manner as
they may determine;

(l) To deposit any moneys, included in or derived from
the trust estate, in any bank or trust company, and from
time to time to provide for the disbursement thereof;

(m) To pay any and all taxes or liens of whatsoever na-
ture or kind imposed upon or against the trust estate, or
any part thereof, out of any funds available for such pur-
pose;

(n) To buy or join with any person or persons in buying
the property of any corporation, any of the securities of
which are included in the trust estate, or any property in
which the Trustees as such shall have or may hereafter ac-

.429

APPENDIX OF FORMS

quire an interest and to allow the title to any property so
bought to be taken in the name or names of and to be held
by such person or persons as the Trustees shall name or
approve and so that all real estate so acquired and in what-
soever name held shall be held upon trust for sale and con-
version into personal estate at such time or times and in
such manner and upon such terms as they shall think fit
but all such real estate shall at all times during anj^ post-
ponement of the sale and conversion thereof, be considered
as personal estate;

(o) To enter into any and all contracts, guaranties, obUga-
tions and other instruments which in the opinion of the
Trustees may be necessary or expedient to carrj^ out, pro-
mote, protect and conserve the trust hereby created and
the interests of the shareholders, including the making of
guaranties to secure the performance of contracts and obhga-
tions of other parties;

(p) Generally in all matters, to deal with the trust estate
and to manage and conduct the affairs thereof as fully as if
the Trustees were the absolute owners of the trust estate,
and to execute and make and do all such agreements, deeds,
instruments and things as the Trustees may deem proper
for any of the said purposes;

(q) At any time and from time to time to vest in and dele-
gate to an executive committee any powers and authorities
conferred upon the Trustees by these presents and to alter,
modify or revoke any such grant or delegation at discre-
tion.

5. The Trustees shall not have any power or authority
to borrow money on the credit or on behalf of the Share-
holders or to make anj^ contract on their behalf for repay-
ment of any money raised by mortgage, pledge or charge
in pursuance of the provisions hereof or to make any con-
tract or incur any liability whatever on behalf of the Share-
holders or binding them personally.

6. The management of the property and affairs of the
trust estate may be carried on by the Trustees under the
name of the North American Companies and the trusts
herel)y created and the Trustees in their collective capacity
may also be designated as the North American Companies.
In all written contracts and obligations it shall be the duty
of the Trustees or other officers or agents especially to stipu-

430

NORTH AMERICAN COMPANIES

late that neither the Shareholders nor the Trustees nor any
officers of the trust shall be held to any personal liability
under or by reason of the same.

7. The Trustees may appoint a President, one or more
Vice-Presidents, a Secretary, a Treasurer and such other
officers and agents as they shall think proper for the manage-
ment of the property and affairs of the trust estate and
assign to them from time to time such duties as they shall
think fit without being answerable for the acts or defaults
of such officers or agents. The Trustees may delegate any
of their powers to an executive committee but such com-
mittee shall in the exercise of any power so delegated con-
form to any regulations that may from time to time be im-
posed by the Trustees. None of the said officers or agents
or members of the executive committee need be Trustees.
The Trustees may fix and pay out of the trust estate the
compensation of the officers, agents and members of the
executive committee appointed by them and if any Trustee
shall act as an officer, agent or member of the executive
committee he may receive compensation for so acting in
addition to that received by him as Trustee.

8. The Trustees may act with or without a meeting and
the action of a majority of the Trustees except as provided
in (k) above shall be valid and binding. Any Trustee may
appoint any other Trustee as his proxy to act for him at
any meeting and may empower any other Trustee to act
on his behalf and to use his name for execution or signa-
ture of documents for the purposes of these presents without
being responsible for loss.

9. Out of the income from the trust estate the Trustees
may make distributions under the name of dividends or
otherwise among the Shareholders as hereinafter provided
at such times as the Trustees may fix, and the Shareholders
shall have no right to any distributions except when and as
declared by the Trustees.

10. The Trustees shall be entitled to remuneration the
amount of which shall from time to time be fixed by vote
of the Shareholders, and shall be paid out of the trust es-
tate.

11. The Trustees shall pay out of the trust estate the ex-
penses of the preparation of this agreement and the forma-

431

APPENDIX OF FORMS

tion of the trust hereby created and the agreements pursuant
to which this agreement and declaration of trust is executed
as referred to herein and of printing and engraving or
lithographing the certificates for shares to be issued here-
under and other expenses of hke nature in connection with
the formation of the trust hereby created.

12. Every Trustee may purchase or acquire shares in all
respects as if he were not a Trustee. No Trustee shall be
disqualified by his office from contracting with the Trus-
tees either as vendor, purchaser or otherwise, nor shall any
such contract or arrangement in which any Trustee shall
be in any way interested be avoided, nor shall any Trustee
so contracting or being so interested be liable to account for
the profit reahzed by any such contract or arrangement
by reason of such Trustee holding office or of the fiduciary
relation thereby estabhshed, but the nature of his interest
must be disclosed by him to the other Trustees before the
contract or arrangement is determined on if his interest then
exists and no Trustee shall vote in respect of any contract
or arrangement in which he is interested as aforesaid but
this prohibition shall not apply to any resolution to give the
Trustees or any of them any remuneration or security by
way of indemnity and it may at any time or times be sus-
pended or relaxed to any extent by vote of the Shareholders.

13. Except in the case of death, resignation or disability
the Trustees to whom the trust estate is granted by these
presents shall continue to be Trustees hereof until the first
annual meeting of the Shareholders at which time an equal
number of Trustees or in the event that such number shall
have been increased by the Trustees or shall be increased by
the Shareholders then such increased number shall be
elected by the Shareholders. The Trustees may at any time
and from time to time until the first annual meeting of the
Shareholders increase the number of Trustees hereunder
but not to a number exceeding nine (9) and may fill any
vacancy caused by such increase and the Shareholders may
at any armual meeting fix the number of Trustees hereunder
but such number shall not be less than three (3) and shall
not exceed nine (9). The Trustees elected at any annual
meeting shall hold office until the next annual meeting there-
after and until tlieir successors have been elected and have
agreed to act. Failure to hold an annual meeting or elect

432

NORTH AMERICAN COMPANIES

Trustees shall not cause any vacancy among the Trustees
or in any way affect the trust hereby created. The Trus-
tees shall have power at any time or times to accept the res-
ignation of any Trustee and fill any vacancy caused by
resignation or otherwise.

14. Any Trustee may retire by presenting his resignation
in writing to some one or more of the Trustees but such
resignation shall be effectual and complete only upon the
appointment of a new Trustee in his place or the previous
acceptance of his resignation by the remaining Trustees or
upon the expiration of six calendar months after such resig-
nation and meanwhile he shall continue to act as such
Trustee.

15. Upon the resignation of any Trustee and upon every
appointment of a new Trustee such instruments shall be
executed as shall be necessary or convenient for vesting
the trust estate in the Trustees for the time being or
providing evidence of such vesting independently of
such resignation or appointment, all of which instru-
ments the Trustees for the time being are hereby author-
ized to execute. The Trustees for the^ time being may
exercise all the powers, authorities and discretions hereby
given to the Trustees notwithstanding any vacancy among
the Trustees.

16. The receipts of the Trustees or either of them or any
of them or of the Treasurer or other officer or agent there-
unto authorized by the Trustees for money or things paid
or delivered to them or him shall be an effectual discharge
to the persons paying or delivering the same therefrom and
from all liability to see to the application thereof. No
purchaser or person dealing with the Trustees shall be
bound to ascertain or inquire as to the existence or occur-
rence of an}'- event or purpose in or for which a sale, mort-
gage, pledge or charge is herein authorized or directed, or
otherwise as to the purpose or regularity of any of the acts
of the Trustees purporting to be done in pursuance of any
of the provisions or powers herein contained or as to the
regularity of the discharge, resignation or appointment of
any Trustee; and a transfer of the trust premises or any
part thereof executed by the Trustee or Trustees in whom
the same shall be vested at the time of any such discharge,

433

APPENDIX OF FORMS

resignation or appointment for the purpose of vesting the
same in the Trustees for the time being of these presents or
providing evidence of such vesting independently of such
discharge, resignation or appointment, shall as to the prop-
erty comprised in such transfer be conclusive evidence in
favor of any such purchaser or other person dealing with
the Trustees as to the matters therein recited relating to
such discharge, resignation or appointment or the occasion
thereof or the occasion of such transfer. No purchaser or
person dealing with any Trustee purporting to act during
the absence of any other Trustee or under any delegation
of authority from any other Trustee shall be concerned to
ascertain or inquire whether an occasion exists in which he
is authorized so to act or in which such delegation is per-
mitted or whether such delegated authority is still subsist-
ing.

17. No corporation, company or body politic shall be
affected by notice that any of its shares or bonds or other
securities are subject to these presents or be bound to see to
the execution of any of the trusts hereunder or to ascertain
or inquire whether any transfer of any such shares, bonds
or securities by the Trustees is authorized notwithstanding
such authority may be disputed by some other person.

18. No Trustee or member of any committee appointed
by the Trustees shall be liable for anything done or omitted
by him in good faith and each shall be answerable and
accountable only for his own acts, receipts, neglects and
defaults respectively and not for those of any other nor of
any agent employed by them nor of any bank, trust com-
pany, broker or other person with whom or into whose
hands any part of the trust estate may be deposited or come,
nor for any defect in title or lack of genuineness or invahdity
of the shares of stocks, bonds, notes, obligations or other
properties or securities at any time included in the trust
estate, nor for any loss, unless it shall happen through his or
its ONVTi wilful default respectively. No Trustee however
appointed shall be obliged to give any bond or surety or
other security for the performance of any of his duties in
the said trust.

19. Each Trustee and each member of any committee
appointetl by the Trustees and each officer, agent and other

434

NORTH AMERICAN COMPANIES

representative appointed pursuant to any provision hereof
shall be entitled to indemnity out of the trust estate against
any and all loss and liability incurred by him or them or
any of them in the execution of the trust hereby created.
But the Trustees or any of them or any member of any com-
mittee or officer, agent or representative appointed hereunder
shall not be entitled to look to the Shareholders personally
for indemnity against any loss or liability incurred by him
or them or any of them in the execution hereof or to call
upon the Shareholders for the payment of any sum of money
or any assessment whatever.

20: In case the Trustees shall acquire any interest in real
estate as proceeds or income of the trust estate they shall
hold the same upon trust for sale and conversion into per-
sonal estate at such time or times and in such manner and
upon such terms as they shall approve and they shall have
the power to postpone such conversion so long as they in
their uncontrolled discretion shall think fit but all such real
estate shall at all times during any postponement of the sale
and conversion thereof be considered as personal estate sub-
ject to the terms hereof and at all times and to the full ex-
tent permitted by law all such real estate shall be consid-
ered and treated as personal property for the purposes of the
trust hereby created.

Shares and Shareholders

21. The beneficial interest in the trust estate shall be di-
vided into twenty thousand (20,000) preferred shares ex-
pressed to be of the amount or par value of one hundred
dollars ($100) each and one million (1,000,000) com-
mon shares without expressed amount or par value.
All such shares shall be personal property, shall be
assignable and transferable in the manner herein pro-
vided and shall entitle the holders thereof only to such
rights and interests in the trust estate as are set forth
in these presents.

22. The said twenty thousand (20,000) preferred shares
of the amount or par value of two million dollars ($2,000,-
000) and five hundred and sixty thousand (560,000) of the
common shares shall be reserved to be issued by the Trus-
tees only for the acquisition by them of shares of stock in

435

APPENDIX OF FORMS

the C. Company, the S. Company and the T. Company.
In the first instance the Trustees shall issue for tne purposes
set forth in this subdivision 22 hereof certificates for the
amount or par value of 935300 dollars preferred shares and
558000 common shares, and shall deliver the said shares
to or upon the order of the parties of the first part hereto.
From time to time the Trustees shall deliver for each addi-
tional share of the common capital stock of the said C. Com-
pany received by the Trustees one of the preferred shares
issued hereunder and shall deliver for each additional share
of the preferred stock of the T. Company received by the
Trustees, one of the preferred shares issued hereunder, and
for each additional share of the common stock of the T.
Company received by the Trustees, one of the common
shares issued hereunder but the total amount of the shares
issued hereunder for the purposes set forth in this sub-
division 22 hereof shall not exceed twenty thousand (20,000)
preferred shares and five hundred and sixty thousand
(560,000) common shares.

23. The Trustees shall from time to time when and as re-
quested by the Syndicate Managers of the Syndicate re-
ferred to in the Preliminary Agreement deliver to or upon
the order of said Sjaidicate Managers certificates for common
shares issued hereunder up to but not exceeding two hun-
dred and twenty thousand (220,000) shares, upon receiving
from the Syndicate Managers the sum of seven dollars and
twenty-seven cents (S7.27) less any discount allowed as
hereinafter provided for each share so issued; provided
however that any of said two hundred and twenty thousand
(220,000) shares which shall not have been taken at the
above rate by the said Syndicate may be issued by the
Trustees in accordance with the provisions of subdivision
25 hereof.

24. The Trustees shall from time to time issue and de-
liver common shares hereunder according to the terms
of thi3 option agreement referred to in the Preliminary
Agreement, up to but not exceeding two hundred and
twenty thousand (220,000) shares, upon receiving the
sum of seven dollars and twenty-seven cents ($7.27)
less any discount allowed as hereinafter provided for
each share so issued; provided however that any of the
two hundred and twenty thousand (220,000) common

436

NORTH AMERICAN COMPANIES

shares last above mentioned may if not taken and paid
for as provided by said option agreement be issued by
the Trustees in accordance with the provisions of subdi-
vision 25 hereof.

25. Any of the shares not taken as provided in subdivi-
sions 23 and 24 hereof may be issued by the Trustees either
for money or for property or in payment of liabihties or
obUgations of the Trustees, and if issued for money may be
issued fully paid up upon the payment to the Trustees of
such sum as they shall determine and if issued for the whole
or any part of the price agreed upon for any property they
may be issued fully paid up upon the transfer of such prop-
erty to the Trustees. All such shares may be issued with-
out offering the same to existing Shareholders or any of
them.

26. The Trustees may accept or agree to accept payment
for any of the shares issued by them under subdivisions
23 or 24 or 25 hereof in instalments and may allow or agree
to allow such discount as they may determine in respect of
any instalment or instalments paid in advance.

27. The relative rights and interests and the preferences
and limitations of the holders of the preferred shares and of
the common shares shall be as follows :

The preferred shares shall entitle the holders to receive
when and as declared by the Trustees dividends at the rate
of six dollars ($6.00) per annum and no more for and on
account of each such share. Such dividends shall be
cumulative from April 1st, 1917 and the moneys there-
for shall be set apart before any dividends shall be paid
or set apart for the common shares so that if in any year
beginning with April 1st, 1917 dividends at the said rate
shall not have been declared upon the preferred shares and
set apart therefor the accumulated and unpaid divi-
dends thereon shall be set apart or provided for before
any dividends shall be paid upon or set apart for the com-
mon shares.

28. Whenever in any year all such dividends shall have
been declared on the preferred shares and set apart and
after April 1st, 1917 all such cumulative dividends shall
have been declared on the preferred shares and set apart
any money appHcable by the Trustees for the payment of

437

APPENDIX OF FORMS

dividends then remaining in their hands or under their
control may to the extent that the Trustees shall see fit be
distributed and paid as a dividend ratably among and to
the holders of common shares but before declaring any
dividends either upon the preferred -or common shares the
Trustees may in their uncontrolled discretion and to the
extent the Trustees may see fit set aside sums for reserve
or other purposes of the trust.

29. In any distribution by the Trustees of the trust
estate upon the termination of the trust each preferred share
shall entitle the holder thereof to receive out of the trust
estate available for distribution to the Shareholders the
sum. of one hundred dollars ($100) or its equivalent and also
a sum equal to six per cent, per amium upon the amount
of such share for the period from April 1st, 1917 to
the date of distribution less the amount of any divi-
dends paid thereon during such period before any amount
shall be paid to the holders of the common shares.
After such amounts shall have been paid in full to or set
apart for the holders of the preferred shares the remain-
der of the trust estate available for distribution shall be
distributed ratably among and to the holders of the com-
mon shares.

30. The preferred shares as a whole may be redeemed at
the option of the Trustees on any date after April 1st,
1917 fixed for the payment of a dividend thereon and the
preferred shares may be redeemed from time to time in
portions at the option of the Trustees at any date or dates
fixed for a dividend thereon upon the payment of the one
hundred and three dollars ($103) for each such share and
all unpaid dividends accumulated to the date for redemp-
tion and upon notice published in a newspaper of general
circulation in the City of New York, a newspaper of general
circulation in the City of Philadelphia, a newspaper of gen-
eral circulation in the City of Boston and a newspaper of
general circulation in the City of Montreal once a week for
four successive weeks immediately preceding the date of
redemption specified in such notice and if less than all of the
preferred shares shall be called for redemption a similar
notice shall also be mailed to each of the persons in whose
name certificates for jireferred shares to be redeemed shall
be registered stating also the number of shares called to be

438

NORTH AMERICAN COMPANIES

redeemed out of the total number standing in the name of
the person to whom such notice is mailed.

31. On or prior to the date fixed for such redemption the
Trustees shall deposit at such office or agency as shall be
designated in such notice of redemption an amount of cash
equal to one hundred and three dollars ($103) for each
share to be redeemed and the amount of unpaid dividends
accumulated thereon to such date of redemption so fixed.
In case notice of redemption shall have been published as
aforesaid and said sum of money shall be so deposited at the
office designated in said notice, dividends on the shares so
called for redemption from and after said date of redemp-
tion shall cease and from and after said date the holders of
said preferred shares shall have no further right or interest
thereunder or in any part of the trust estate except to re-
ceive payment for said shares out of the funds so depos-
ited by the Trustees at the rate above provided upon
presentation and surrender of their respective certificates
at the office designated in said notice. If the Trustees
shall not on or prior to the date of redemption deposit
a sum of money sufficient to pay all such shares in the
manner above stated dividends shall continue to accumulate
on said shares. If at any time the Trustees shall determine
to call for redemption a portion of all the outstanding
preferred shares they shall assign a number to every out-
standing preferred share and shall draw by lot the shares
to be redeemed.

32. The Trustees may in their uncontrolled discretion at
any time and from time to time, apply any of the income
from the trust estate to the redemption of preferred shares by
purchasing the same in the open market for such price as
they shall determine not to exceed one hundred and three
dollars (1103) for each share and all unpaid dividends ac-
cumulated to the date of the purchase.

33. As evidence of the ownership of said preferred and
common shares the Trustees shall cause to be issued trans-
ferable certificates each of which certificates and the form
for the transfer thereof shall be substantially in the follow-
ing forms respectively except that the Trustees are hereby
authorized to modify the same from time to time in any
manner not inconsistent with the terms and conditions
hereof.

439

APPENDIX OF FORMS

Face of Certificate for Preferred Shares

North American Companies
No Shares.

This certifies that is the holder

of preferred shares fully paid and non-
assessable of the amount or par value of $100 each in the
Trust called North American Companies estabhshed by an
Agreement and Declaration of Trust dated May 5th, 1915
between D., T. and C. parties of the first part and W. and
H. as Trustees parties of the second part and the holders of
the shares issued thereunder parties of the third part. The
said shares are issued, received and held subject to the pro-
visions set forth on the back of this Certificate which are
expressly made a part hereof and to wliich reference is
hereby expressly directed. The shares represented by this
Certificate are transferable only by the holder in person or
by attorney on the books of the Trustees under the said
Agreement and Declaration of Trust upon surrender of this
Certificate properly endorsed.

In Witness Whereof the Trustees under the said Agree-
ment and Declaration of Trust have signed this Certificate
this day of 19 . . .

As Trustees under the Agreement and
Declaration of Trust dated May 5th,
1915 establishing the Trust therein
called North American Companies
and not individually.

440

NORTH AMERICAN COMPANIES

Face of Certificate for Common Shares

North American Companies
No Shares.

This certifies that is the holder of

common shares fully paid and non-
assessable without expressed amount or par value in the
Trust called North American Companies established by
an Agreement and Declaration of Trust dated May 5th,
1915 between D., T. and C. parties of the first part and
W. and H. as Trustees parties of the second part and the
holders of the shares issued thereunder parties of the third
part. The said shares are issued, received and held subject
to the provisions set forth on the back of this Certificate
which are expressly made a part hereof and to which refer-
ence is hereby expressly directed. The shares represented
by this Certificate are transferable only by the holder in
person or by attorney on the books of the Trustees under
the said Agreement and Declaration of Trust upon surrender
of this Certificate properly endorsed.

In Witness Whereof the Trustees under the said Agree-
ment and Declaration of Trust have signed this Certificate
this day of 19 . .

As Trustees under the Agreement and
Declaration of Trust dated May 5th,
1915 establishing the Trust therein
called North American Companies
and not individually.

441

APPENDIX OF FORMS

Back of Certificates for both Preferred and Common
Shares

Pro\asions referred to on the face of this Certificate:

1. The Agreement and Declaration of Trust (hereinafter
called the Trust Agreement) referred to on the face of this
Certificate provides that the beneficial interest in the trust
estate thereby established shall be divided into 20,000 pre-
ferred shares expressed to be of the amount or par value of
$100 each and 1,000,000 common shares without expressed
amount or par value and provides for the issue of the said
shares by the Trustees thereunder.

2. As and to the extent provided in the Trust Agreement
(a) The shares are of two classes, to wit, preferred and

common.

(6) The holders of the preferred shares are entitled to re-
ceive when and as declared by the Trustees dividends at
the rate of six dollars ($6.00) per annum and no more for
and on account of each such share. Such dividends are cum-
ulative from April 1st, 1917 and the moneys therefor shall
be set apart before any dividends shall be paid or set apart
for the common shares so that if in any year beginning with
April 1st, 1917 dividends at the same rate shall not have
been declared upon the preferred shares and set apart there-
for the accumulated and unpaid dividends thereon shall be
set apart or provided for before any dividends shall be paid
upon or set apart for the common shares.

(c) Whenever in any year all such dividends shall have
been declared on the preferred shares and set apart and after
April 1st, 1917 all such cumulative dividends shall have
been declared on the preferred shares and set apart any
money applicable by the Trustees for the payment of divi-
dends then remaining in their hands or under their control
may to the extent that said Trustees shall see fit be dis-
tributed and paid as a dividend ratably among and to the
holders of the common shares but before declaring any divi-
dends cither upon the preferred or common shares the
Trustees may in their uncontrolled discretion and to the
extent the Trustees may see fit set aside sums for reserve
or other purposes of the trust.

{d) In any distribution by the Trustees of the trust es-

442

NORTH AMERICAN COMPANIES

tate upon the termination of the trust each preferred share
shall entitle the holder thereof to receive out of the trust
estate available for distribution to the Shareholders the sum
of one hundred dollars ($100) or its equivalent and also a sum
equal to six per cent, per annum upon the amount of such
share for the period from April 1st, 1917 to the date of dis-
tribution less the amount of any dividends paid thereon
during such period before any amount shall be paid to the
holders of the common shares. After such amounts shall
have been paid in full to or set apart for the holders of the
preferred shares the remainder of the trust estate available
for distribution shall be distributed ratably among and to
the holders of the common shares.

(e) The preferred shares as a whole may be redeemed at
the option of the Trustees on any date after April 1st, 1917
fixed for the payment of a dividend thereon and the pre-
ferred shares may be redeemed from time to time in portions
at the option of the Trustees at any date or dates fixed for
a dividend thereon upon the payment of one hundred and
three dollars ($103) for each such share and all unpaid
dividends accumulated to the date for redemption upon
notice published in a newspaper of general circulation in
the City of New York, a newspaper of general circulation
in the City of Philadelphia, a newspaper of general circula-
tion in the City of Boston and a newspaper of general cir-
culation in the City of Montreal once a week for four suc-
cessive weeks immediately preceding the date of redemption
specified in such notice, and if less than all of the preferred
shares shall be called for redemption a similar notice shall
also be mailed to each of the persons in whose names cer-
tificates for preferred shares to be redeemed shall be regis-
tered stating also the number of shares called to be redeemed
out of the total number standing in the name of the person
to whom such notice is mailed. In case notice of redemption
shall have been published as aforesaid and the amount to be
paid upon the shares at redemption shall have been deposited
at an office or agency of the Trustees at or before the date
for redemption, dividends on the shares called for redemp-
tion from and after said date shall cease and from and after
said date the holders of said preferred shares shall have no fur-
ther right or interest thereunder or in any part of the trust
estate except to receive payment for said shares out of the

443

APPENDIX OF FORMS

funds so deposited by the Trustees at the rate aforesaid
upon presentation and surrender of their respective certifi-
cates at the office designated in said notice.

3. All the provisions of the Trust Agreement are hereby
made a part hereof as if the same were herein set forth at
length and reference is hereby also made to the Prehminary
Agreement therein mentioned among the parties of the first
part to the Trust Agreement in pursuance of which Pre-
liminary Agreement and subject to the terms of which the
Trust Agreement is made and all the said shares are issued,
received and held subject and the holder hereof hereby ex-
pressly assents to all the provisions of the Trust Agreement
and the Prehminary agreement. An original of the Trust
Agreement and of the Preliminary Agreement are lodged
with the Trustees at their office and are open to the inspec-
tion of any Shareholder during business hours.

4. The within Certificate is made by the Trustees not in-
dividually but as Trustees under the Trust Agreement and
any and all personal liability of the parties of the first part
named in the Trust Agreement and of the Trustees, execu-
tive committee and the Shareholders thereunder is by the
acceptance and as a consideration for the issue and execu-
tion hereof expressly waived by the holder hereof.

For value received hereby sell, assign

and transfer unto • • •

of the shares represented by the within Certificate and do

hereby irrevocably constitute and appoint

Attorney to transfer the said shares on the books of the
Trustees under the within mentioned Agreement and Dec-
laration of Trust with full power of substitution in the
premises.

Dated ,19..

In presence of

Notice. The signature to this assignment must cor-
respond witli the name as written upon the face of the Certifi-
cate; in (!very i:)urti(nilar without alteration or enlargement or
any change whatever.

444

NORTH AMERICAN COMPANIES

34. An original of this Trust Agreement and of the Pre-
liminary Agreement herein referred to shall be lodged with
the Trustees and kept at their office and shall be open to the
inspection of any Shareholder during business hours.

35. No certificate shall be issued for less than one share of
either class. Certificates may be signed by the Trustees or
by any agent thereunto authorized by them. In case any
of the Trustees in whose name and in whose behalf any of
said certificates shall have been signed shall cease to act in
such capacity before the certificate so signed shall have
been issued, such certificate may, nevertheless, be issued as
if the persons in whose name and in whose behalf such cer-
tificates were signed had not ceased to be such Trustees.

36. The Trustees shall keep or cause to be kept at an office
or agency in the City of Boston or in the City of New York
or in the City of Philadelphia or in the City of Montreal,
or in either of said cities, transfer books in which shall be
registered the names of the holders of the certificates to-
gether with the post office address of each, as given by him
for such purpose. The Tiiistees may appoint a Transfer
Agent to keep such books and may require that all certificates
before issue shall be countersigned by such Transfer Agent
and that no such certificates shall be or become valid for any
purpose until so countersigned. The Trustees may also ap-
point a Registrar and may require that all certificates for
shares issued hereunder shall be countersigned by such
Registrar and that no such certificates shall be or become
valid for any purpose until so countersigned. Shares shall
only be transferable on said books upon the execution of a
transfer substantially in the form endorsed on said certificates
and on surrender of the certificate by the registered holder
in person or by attorney and in accordance and compliance
with such rules and regulations as from time to time the
Trustees may establish. The Trustees, any Transfer Agent
or Registrar appointed by them. Executive Committee, and
all other persons may deem and treat the person in whose
name any certificate shall be registered upon the books kept
as above provided as the absolute owner of the share or
shares represented by such certificate for the purpose of
receiving any dividend or other pajrments on or in respect
thereof, for the purpose of voting and acting in respect
thereof and for all other purposes, and none of them shall

445

APPENDIX OF FORMS

be affected by any notice to the contrary. Such transfer
books may be closed by the Trustee at and during any
period prior to the date of pajonent of any dividend or the
distribution of anj' part of the Trust Estate upon the
shares, or prior to the date of any meeting of Share-
holders. The Trustees may also close such transfer books
for such other reason and for such period as they may
deem advisable.

37. Until permanent certificates can be prepared the
Trustees may issue and deliver in lieu thereof and subject to
the same pro\Tsions, limitations and conditions, temporary
t}-peTvritten, printed or lithographed certificates substan-
tially of the purport of the certificates heretofore recited.
Such temporary certificates shall be countersigned by the
Transfer Agent or by the Registrar in the manner above
pro\'ided if any such Transfer Agent or Registrar or both
shall have been appointed by the Trustees in like manner as
herein pro%'ided T\-ith respect to the permanent certificates.
Such temporary certificates shall be exchangeable at an
office of the Trustees for permanent certificates w-ithout
expense to the holder, and until such exchange the said
temporary certificates shall be transferable in the same man-
ner as permanent certificates and shall entitle the holder to
the same rights as permanent certificates.

38. In case of the mutilation, loss or destruction of any
certificate, the Trustees may on e^-idence satisfactory to
them that it has been so mutilated, lost or destroyed and
upon such terms as to indemnity and otherwise as ma}' be
prescribed by them, issue a new certificate or certificates in
the place of the certificate mutilated, lost or destroyed.

39. Everj' transfer (other\\-ise than by operation of law)
of any share and the interest represented thereby shall be
in %\Titing bj^ the owner and registered holder, and upon
delivery thereof with the existing certificate for such share
to the Trustees of their Transfer Agent shall be recorded on
the transfer books and a new certificate shall be given to the
transferee. In case of a transfer of only a part of the shares
in any certificate, a new certificate for the residue thereof
shall be given to the transferor. Until the transfer shall be
so delivered and recorded the transferor shall be deemed to
be the holder of the share or shares comprised therein for
all the purposes of the trusts hereof, and neither the Trustees

446

NORTH AMERICAN COMPANIES

nor their Transfer Agent shall be affected by any notice of
any unrecorded transfer or otherwise to the contrary.

40. Any person becoming entitled to any share in con-
sequence of the death, bankruptcy or insolvency of any Share-
holder in any way other than by a transfer in accordance
with the subdivision 39 hereof, upon the production of such
evidence of his title as may be prescribed by the Trustees
and upon surrender of the said certificate to the Trustees
or one of their Transfer Agents, shall be registered in the
transfer books as the holder of the said shares and receive
new certificates for the same.

41. Two or more persons holding any share shall be joint
tenants of the entire interest therein and no entry shall be
made on any certificate or in the Trustees' books that any
person is entitled to any future, limited or contingent in-
terest in any share. But any person registered as the holder
of any share may, subject to the provisions hereinafter con-
tained, be described therein as a Trustee of any kind, and
any words may be added to the description to identify the
trust.

42. The Trustees shall not, nor shall the Committee or
Shareholders or any Transfer Agent or other agent of the
Trustees or Committee, be bound to take notice or be
affected by notice of any trust, whether express, implied or
constructive, or any charge or equity to which any of the
said shares or the interest of any of the Shareholders in the
trusts in these presents may be subject or to ascertain or
inquire whether any sale or transfer of any such share or
interest by any such Shareholder or his personal representa-
tives is authorized by such trust, charge or equity, or to
recognize any person as having any interest therein except
the persons registered as such Shareholders, and the receipt
of the person in whose name any share is registered or if such
share is registered in the names of more than one person the
receipt of one of said persons shall be a sufficient discharge
for all dividends and other money payable in respect of said
shares and from all liability to see to the application thereof.

43. Unless specific notice to the contrary shall have been
given in writing to the Trustees or their Transfer Agent,
they may deem and treat any person presenting a share
certificate together with the transfer thereof purporting to

447

APPENDIX OF FORMS

be signed by the registered holder of such certificate as the
bona fide and sole owTier thereof and accordingly on demand
they may transfer the shares thereby represented.

Meetings of the Shareholders

44. An Annual Meeting of the Shareholders for the elec-
tion of Trustees and the transaction of such other business
as maj^ be brought before the meeting shall be held at the
office of the Trustees or such other place as may be deter-
mined by the Trustees on the second Tuesday of May in
each year at twelve o'clock noon, beginning with the year
1916. At every such meeting the Trustees shall lay before
the Shareholders an account of the receipts and expenditures
and income account of the trust estate for the year ending
on the 31st day of December next preceding such meeting.
The Trustees and any Shareholder may also submit at any
such meeting any report, resolution or proposition concern-
ing which action by the Shareholders is desired. At each
amiual meeting the whole number of Trustees, as fixed by
this agreement and declaration of trust, or as increased or
decreased under the provisions hereof shall be elected by the
Shareholders and any business brought before the meeting
may be considered or transacted.

45. Neglect or failure to hold such annual meeting shall
not cause any vacancy among the Trustees and the persons
acting as Trustees shall continue to act until the holding of
such meeting.

46. The Trustees may at any time call a special meeting
of the Shareholders to be held at such place as the Trustees
may determine. At a special meeting no business shall be
transacted other than such as is included in the purposes for
which the meeting is called.

47. The Chairman of the Executive Committee shall pre-
side at every meeting of the Shareholders but if he is not
present at the commencement of the meeting or being present
shall not be willing to preside or shall not be acceptable for
such purpose to the Shareholders present they may choose
another person to preside.

48. Written or printed notice of the annual meeting and
of special meetings of the Shareholders shall be given seven
days at least before any such meeting on behalf of the Trus-

448

NORTH AMERICAN COMPANIES

tees to each of the Shareholders by such person as the Trus-
tees may designate as their Secretary and in such manner as
the Trustees may prescribe or approve, and such notice
shall specify the time and place of the meeting, and in the
case of a special meeting, shall state the purposes thereof.
The Shareholders may waive in writing the notice required
for annual and special meetings of Shareholders. No failure
to give notice and no irregularity in notice of the annual
meeting or in the mailing thereof shall affect the validity of
such meeting or of any proceedings thereof.

49. At all meetings every Shareholder shall have one
vote for every share standing in his name on the books of
the Trustees whether preferred or common and may vote in
person or by proxy appointed by him in writing or in the
case of a corporation appointed by it in writing under its
corporate seal. The holders of a majority of all the shares
issued and outstanding shall constitute a quorum for the
transaction of business, but the holders of a less amount
may from time to time adjourn the meeting to a time fixed
by them without further notice to the Shareholders of the
time so fixed for the holding of such adjourned meeting.

50. If the holder of any share be a minor or a person of
unsound mind or subject to the legal control of any other
person as regards the control or management of such share,
he may vote by his guardian, tutor, committee, curator or
other person having such control, and such vote may be
given in person or by proxy. When any share is held jointly
by several persons any one of them may vote at any meeting
in person or by proxy in respect of such share but if more than
one of them shall be present at such meeting in person or by
proxy no vote shall be received m respect of such share unless
all such persons so present join in or assent to such vote.

51. For the purpose of determining the Shareholders en-
titled to vote at any meeting the Trustees may close the
transfer books at the end of such day as they may direct
and the same shall remain closed until the end of the meet-
ing and no person shall be entitled to vote at such meeting
whose name is not entered on the transfer books prior to the
closing thereof.

52. Except as otherwise herein provided a majority of the
votes given at any meeting shall constitute the action of the

449

APPENDIX OF FORMS

meeting and in case of an equality in number of votes the
Chairman of the meeting shall have an additional vote.

53. At any time the Shareholders may consent to the
termination by the Trustees of the trust hereby created at
an eq,rlier date or different time than elsewhere in this agree-
ment limited or prescribed and may consent to any amend-
ment change or addition to these presents or to any of the
terms and provisions hereof which shall have been adopted
by the Trustees. Any such consent may be given without
a meeting of the Shareholders by writing signed by the hold-
ers of at least two-thirds in number of all the shares at the
time outstanding or at a meeting of the Shareholders by resolu-
tion adopted by the affirmative votes of the holders of at least
two-thirds in number of all the shares at the time outstand-
ing. No such action shall however be taken at a meeting of
the Shareholders either annual or special unless the proposed
action shall have been referred to in the notice of the meeting.

54. Every notice to the Shareholders required or provided
for in these presents may be given to them personally
or b}^ sending it to them through the post office in a postage
prepaid letter addressed to each of them respectively at
his address as the same appears on the records of the Trus-
tees and posted in the City of Boston or the City of New
York or the City of Philadelphia or the City of Montreal
and shall be deemed to have been given at the time when
it is so posted. Any notice so sent to the registered address
of any Shareholder shall be deemed to have been duly sent
in respect of any such share notwithstanding such Share-
holder be then deceased and whether the Trustees or the
members of the Committee or any person sending the notice
shall have knowledge or not of his death until some other
person shall be registered as a holder. The certificate of
the person or persons giving such notice shall be sufficient
evidence thereof and shall protect persons acting in good
faith in reliance upon such certificate.

Duration of the Trust

55. Unless sooner terminated as provided in subdivi-
sion 56 hereof the trust hereby created shall continue until
the expiration of twenty-one (21) years after the death of
the last survivor of the following named persons:

450

NORTH AMERICAN COMPANIES

and upon the expiration of such period the trust shall ter-
minate.

56. The Trustees may with the consent of the Shareholders
given in accordance with subdivision 53 hereof terminate
the trust hereby created at an earlier date or different time
than that limited or prescribed in subdivision 55 hereof.

57. Upon the termination of the trust hereby created
whether by limitation of time as provided in subdivision
55 hereof or by action of the Trustees with the consent of
the Shareholders as provided in subdivisions 53 and 56
hereof the Trustees shall sell or "otherwise dispose of the trust
estate for considerations and upon such terms as in their
absolute and uncontrolled discretion they shall fix and
determine not however inconsistent with the terms and
conditions of this agreement. The proceeds of such sale
shall be applied as follows :

First. To the payment of all prior costs, charges and ex-
penses;

Second. To the payment of any then existing indebted-
ness incurred or issued by or on behalf of the Trustees with
the written approval of the Trustees;

Third. To the payment of all charges, expenses and lia-
bilities of the Trustees and of the Executive Committee in-
curred in connection with the administration, management,
control and termination of the trust hereby created;

Fourth. The remainder thereof shall be distributed among
the Shareholders as provided in subdivision 29 hereof.

In case the trust estate shall be sold and disposed of
partly for cash (always provided that there shall be cash
sufficient for the purposes hereinabove enumerated in divi-
sions First, Second and Third of this subdivision 57 hereof
and partly for securities or other property), the Trustees
shall place a valuation upon such securities or other prop-
erty and shall distribute the same in kind to the Share-
holders on the basis set forth in division Fourth of this sub-
division 57 it being within the absolute and uncontrolled
discretion of the Trustees to determine what part, if any,
shall be paid to the holders of the preferred and common
shares in cash and what in securities or other property.
Any valuation, determination, sale or distribution so made
by the Trustees shall be conclusive upon all Shareholders
and other persons interested in the trust estate. Any Trus-

451

APPENDIX OF FORMS

tee or any member of the Executive Committee or any Share-
holder may bid for and purchase any property at any sale
at public auction pr private sale without accountability
except for the pajinent of the purchase price. In making
any sale the Trustees shall have the right to sell at public
auction or private sale and to buy in at such sale or rescind
or vary any contract of sale and to sell without being an-
swerable for loss; and in connection therewith to execute
any and all deeds and instruments.

Miscellaneous Provisions

58. The ownership of any share or any security or obliga-
tion issued hereunder in accordance with the provisions
hereof shall not entitle such owner to any title in or to the
trust estate whatsoever or to any right to terminate the
trust hereby created or to any right to require any distribu-
tion or partition of the trust estate or any part thereof other
than in accordance wdth the terms and provisions hereof.

59. The death of any Trustee or of any holder of any
share or security issued hereunder in accordance with the
provisions hereof at any time during the continuance of the
trust hereby created shall not operate to terminate the said
trust and shall not entitle the legal representatives of the
deceased Trustee or of such deceased holder to terminate
this trust or to require any accounting or distribution or
partition of the trust estate or of any part thereof, but the
legal representatives or assigns of any deceased holder of
any share or other security issued hereunder shall succeed
to the rights of such decedent.

60. Nothing in this agreement or in the certificates issued
hereunder expressed or implied is intended or shall be con-
strued to give to any person or corporation other than the
parties hereto including the Shareholders any legal or equit-
able right, remedy or claim under or in respect of this agree-
ment or of any covenant, condition or provision therein
contained, all its covenants, conditions and provisions being
intended to be and being for the sole and exclusive benefit
of the parties hereto including the Shareholders.

61. In the construction of the provisions of this agree-
ment and the certificates issued hereunder the word "Trus-
tees" whenever used means the Trustees for the time being,

452

NORTH AMERICAN COMPANIES

whether original or successor, and the word Trustee shall
apply to any one of the Trustees whenever the context so
admits. Whenever the word "stock" is used herein it shall
be deemed to extend to and include voting trust certificates
for any such stock.

62. The headings of different parts of these presents and
the marginal notes are inserted for convenience of reference
and are not to be taken to be any part of these presents or to
control or affect the meaning, construction or effect of the same.

63. The Trustees may with the consent of the Share-
holders given in accordance with subdivision 53 hereof
amend, change or add to these presents and any of the terms
and provisions thereof in any manner and to any extent, but
no such amendment shall affect the validity or effect of any-
thing previously done by the Trustees or Shareholders here-
under.

64. This instnmient is executed by the Trustees and de-
livered by all the parties hereto in the Commonwealth of
Massachusetts and with reference to the laws thereof; and
the rights of all parties and the construction and effect of
each and every provision hereof shall be determined by the
laws of said Commonwealth.

65. This agreement is executed in five counterparts by
the parties of the first and second parts, each of which
counterparts shall be deemed an original and the acceptance
of the certificates issued hereunder shall constitute the Share-
holders parties to this agreement with the same force and
effect as if they had hereunto signed their names and af-
fixed their seals.

In Witness Whereof at the City of Boston in the Com-
monwealth of Massachusetts the parties of the first and
second parts have hereunto subscribed their names and
affixed their seals as of the day and year above written.

Parties of the first part.

Trustees.
453

FORM OF LIMITATION OF LIABILITY IN LEASE

Provided always, and it is hereby declared and agreed,
that any claim for debt or damages under the reservations
of rent and the covenants on the part of the lessees herein
contained or any of them shall be a charge upon and shall
be enforceable against the property and effects subject to
the trusts of the said indenture at the time of proceedings
to enforce the same, but no such claim for debt or damages
nor any other claim under the stipulations herein contained
shall be enforceable against any trustees or trustee for the
time being of said indenture personally, and neither the trus-
tees for the time being nor the shareholders under said
indenture of trust shall be held to any personal liability under
or by reason of any of the stipulations herein contained.
But this provision shall not prevent the lessor from obtain-
ing and enforcing such decree in equity against the trustees
for the time being as may be necessary or appropriate to
compel the application of the property and effects then in
their hands as trustees to the performance of the stipula-
tions of this lease or to prevent the trustees for the time
being from violating the stipulations herein contained, and
this provision shall not prevent the lessor from maintaining
such proceedings as may be necessary or appropriate to
obtain possession of the demised premises in case of a vio-
lation of the provisions hereof; nor shall this provision other-
wise interfere with the force or effect of any of the said cove-
nants or affect any other right or remedy of the lessor in
respect of any default in the performance or observance
thereof, and this provision shall not exempt any such trus-
tees from personal liability in respect of any trusts herein con-
tained regarding the application of any insurance money or of
any moneys paid to them out of damages received for such
taking as is hereinbefore mentioned (but so that such personal
liability of any trustee shall exist only as to breaches of trust
which occur while he is trustee) and, further, that this provi-
sion shall not exempt from personal lial)ility any assignee
of this lease who shall not be a trustee under said indenture.

454

K

ELECTRIC COMPANIES

Five Per Cent First Lien Gold Bond

For Value Received the Electric Companies will

pay to J. S. or bearer One Thousand Dollars in gold coin of
the United States of America of the present standard of
weight and fineness on the 1st day of June 1925 at the office

of the Trust Company in the city of Boston and will

also pay interest thereon in like gold coin at the rate of 5 per
centum per annum semi-annually on presentation and sur-
render of the annexed coupons at the time and place therein
mentioned.

If the securities pledged for the payment hereof under the
indenture hereinafter mentioned shall be sold to enforce the
security of the said indenture as therein provided the princi-
pal of this bond shall thereupon become due and payable.

This bond is one of a series of bonds of the promisor issued
or to be issued for the aggregate principal sum of not exceed-
ing $1,000,000 under and in pursuance of and all equally
secured by a collateral trust indenture dated the 5th day
of June 1905 whereby all shares bonds and other securities
of street railway corporations and other property now owned

or hereafter to be acquired by the Electric Companies

are pledged to the Trust Company as Trustee for the

security and payment of the said bonds to which indenture
reference is hereby made for a statement of the property
pledged the nature and extent of the security the rights of
the holders of the said bonds in the said security and the
terms upon which the said bonds are secured.

This bond is redeemable at par and accrued interest on
any interest payment day at the option of the undersigned
by giving notice by publication for six successive weeks in a
newspaper of general circulation in the city of Boston which
notice shall state the time and place of such payment. In-
terest on this bond shall cease if this bond is not presented
for payment in accordance with such notice.

The contract evidenced by this bond binds only the funds

455

APPENDIX OF FORMS

and property held in trust by the Electric Companies

and neither anj^ Trustee or Director of the said companies
nor the holder of any of its certificates for shares shall be
held to any personal liabihty under or by reason of any of
the provisions hereof such habihty if any being expressly
waived by the acceptance of this bond,

Tliis bond shall not become obligatory until it shall have
been authenticated by the certificate of the Trustee under
the said indenture hereon endorsed.

In Witness Whereof The Electric Companies

has caused these presents to be signed in its behalf by the
President and Secretary of its Board of Directors duly
authorized and the coupons hereto attached to be authen-
ticated by the facsimile signature of its Treasurer as of the
1st day of June 1905.

Electric Companies.

By

President.

Secretary.

09 K Coupon

On the 1st day of June 19 . . . the Electric Companies

will pay to the bearer at the office of the Trust Com-
pany in the city of Boston $25 in gold coin of the United
States of the present standard of weight and fineness for
six months' interest on its 5 per cent First Lien Gold Bond
No unless such bond shall have been sooner redeemed.

Trustee's Certificate

This bond is one of a series of bonds referred to in the

within mentioned indenture between the Electric

Companies and the Company as secured thereby.

Trust Company, Trustee.

By

Secretary.

For value received the undersigned hereby assigns to
the within bond and the claim repre-
sented thereby without recourse to the undersigned.

(Signed) J. S.
456

CONSTITUTION

Article I
Object of the Club
The Club is established in the City of

for the promotion of social intercourse among authors and
artists, and other gentlemen connected with or interested
in literature and art.

Article II
Officers

Section 1. The oflScers of the Club shall consist of a
President, two Vice-Presidents, a Secretary, a Treasurer,
ten Governors, and a Committee on Elections,

The President, Vice-Presidents, Secretary, Treasurer,
and Governors shall constitute the Executive Committee.

Section 2. The President shall preside at all meetings
of the Club and of the Executive Committee. In the ab-
sence of the President, or if the office is vacant, one of the
Vice-Presidents shall preside; and in the absence of the Presi-
dent and both Vice-Presidents a Chairman shall be chosen
by vote.

Section 3. The Secretary shall keep a record of the pro-
ceedings of the Club, of the Executive Committee, and of
the Committee on Elections; shall notify new members of
their election; shall issue all notices and conduct all cor-
respondence of the Club, of the Executive Committee, and
of the Committee on Elections, except where otherwise pro-
vided. If the Secretary is absent from a meeting, a Secre-
tary pro tempore shall be chosen by vote. The Secretary
shall be exempted from the payment of the annual assess-
ment.

Section 4. The Treasurer shall collect and keep all
moneys of the Club, and disburse them under the direction
of the Executive Committee. He shall keep the accounts of
the Club, and shall make a report of its financial condition

457

APPENDIX OF FORMS

at each annual meeting, and shall send all notices and con-
duct all correspondence relating to financial matters of the
Club. His accounts shall be audited in the manner provided
by Section 7 of this Article. He shall be exempted from the
payment of the annual assessment, and shall be allowed such
sum of money for clerical assistance as the Executive Com-
mittee may deem expedient.

At the end of each fiscal year the Treasurer shall report
to the Executive Committee the total amount of cash in
bank and on hand and accounts receivable less a sum suf-
ficient for the payment of all current bills of the Club. Out
of the amount then remaining, if in excess of four thousand
dollars, the sum of four thousand dollars shall be reserved
towards the running expenses of the succeeding fiscal year,
and the balance shall be invested under the direction of the
Executive Committee by the Treasurer or such person or
persons as the Executive Committee may appoint, in such
manner and subject to such terms and conditions as the Ex-
ecutive Committee may determine. The fund shall be
known as the Reserve Fund. All income thereof shall be
paid to the Treasurer to be applied towards the general ex-
penses of the Club, but no part of the principal of the Fund
shall be spent except by a vote of the Club, on the recom-
mendation of the Executive Committee, to be passed at a
meeting, notice of which shall be given at least ten days
prior thereto, and shall specify the amount and objects of
such expenditure. In all matters not herein provided for,
the Executive Committee shall have full control and au-
thority over the said Fund, and the securities in which it
may be invested.

Section 5. The Executive Committee, seven of whom
shall constitute a quorum, shall hold the legal title to all the
property and moneys of the Club in trust for the members,
except that the title to any real estate which may be ac-
(luircd may be taken and held by trustees appointed for the
{)urpose by the Club. The Executive Committee shall have
the management and control of the Club, and may make or
authorize all necessary contracts for its administration; but
the Executive Committee .shall have no authority or power,
except by spe(;ial vote of the Club, to make it liable for any
debt beyond the amount of money which may be at the time
in the Treasurer's hands and not needed for the discharge of

458

CONSTITUTION

existing debts or liabilities. The Executive Committee may-
make such rules and regulations for the management of the
Club and for the use of the club-house, not inconsistent with
the Constitution and By-Laws, as it may deem expedient;
and it shall appoint from its own number a House Committee
of three, and commit thereto the immediate supervision of
the club-house, under the direction and control of the Ex-
ecutive Committee, The Executive Committee shall have
full power to act in all matters not otherwise provided for
in the Constitution or By-Laws.

Section 6. The Executive Committee shall appoint
from its own number an Art and Library Committee, con-
sisting of five persons, who shall have, under the direction
and control of the Executive Committee, the selection and
charge of all pictures and other works of art, of exhibitions,
of concerts, of lectures, and of all books, periodicals, maga-
zines, and newspapers purchased by or belonging to the
Club. The Art and Library Committee may appoint, either
from its own number or from the members of the Club, one
or more persons to take immediate charge of any of the
matters committed to it under the provisions of this section.

Section 7. The Executive Committee at its first meet-
ing shall appoint from the Club at large an Auditing Com-
mittee of three members, whose duty it shall be to audit
the Treasurer's account, either in person or by an expert,
and make report thereon to the Executive Committee when
so requested.

Section 8. All officers of the Club shall be elected by
ballot at the annual meeting and shall hold office for one
year from the first day of June next ensuing, and until their
successors shall have been chosen and shall have accepted
office; except the Committee on Elections, which shall hold
office for the period hereinafter provided. In case of a
vacancy in the office of President or Vice-President, the
Executive Committee may call a special meeting of the
Club to fill the same. All other vacancies, except such as
may occur in the Committee on Elections, shall be filled by
the Executive Committee. In case of the absence or dis-
ability of the Treasurer or of the Secretary, the Executive
Committee shall have the power to appoint a Treasurer pro
tempore or a Secretary pro tempore to serve during such ab-
sence or disability.

459

APPENDIX OF FORMS

Article III

Elections

Section" 1. The Committee on Elections, nine of whom
shall constitute a quorum, shall consist of sixteen members,
of whom the SecretaPk' shall be one. At each annual meet-
ing, five new members shall be chosen for the term of three
years, and no person, except the Secret an-, ha^'ing serv'ed
as a member of said Committee shall be eHgible to serve
again until the expiration of one year from the end of his
last term of office. Any vacancies that may occur in its
membership shall be filled by the Committee.

Section 2. All elections to membership in the Club shall
be made by the Committee on Elections at stated meetings,
held for that purpose, either by secret or open ballot as the
Committee may determine, and one negative vote in five
shall exclude the candidate voted upon.

Section 3. Any man of the age of twenty-one years
may be proposed for membership in the Club by two mem-
bers not members of the Committee on Elections, who shall
state whether he is proposed as a resident or a non-resident
member, and shall certify under their own hands that they
know the candidate personally, and beheve liim a fit person
to be a member. The name of the candidate thus proposed
shall be posted in one or more prominent places in the club-
house, with the names of his proposers, the date of posting,
and his place of residence if he be a candidate for non-
resident membership other than an officer of the United
States Army or Xav3^ No name shall be acted upon until
it has been posted at least fourteen daj's. No elections shall
take place in the months of July, August, and September,
and not more than ten resident members shall be elected in
any calendar month.

Section 4. Each candidate elected to membership shall,
by a notice sent to his address as given by his proposers, be
notified by the Secretary of his election and of the amount
of the entrance fee and annual assessment to be paid by
him; but he shall not be entitled to any of the privileges of
membership until he has paid to the Trea.surer the entrance
fee and the proportionate part of the annual assessment for
the current year, fixed by the By-Laws. If the amount due

460

CONSTITUTION

is not paid within sixty days after said notification has been
sent, his election may be cancelled by the Executive Com-
mittee.

Section 5. No candidate rejected by the Committee on
Elections shall be proposed again witliin six months there-
after.

Section 6. The number of members of the Club shall
not exceed four hundred and fifty resident members, exclu-
sive of the Secretary and Treasurer and those exempted
from payment of dues under Article I, Section 4, and Sec-
tion 7, of the By-Laws, and one hundred non-resident mem-
bers, exclusive of officers of the United States Army or Navy
and those exempted from payment of dues under Article I,
Section 4, of the By-Laws. The number of non-resident
members who are officers of the United States Army or
Navy shall not exceed fifty, exclusive of those who are ex-
empted from payment of dues under Article I, Section 4, of
the By-Laws. In case the number of paying members shall
by the return of absentees or by the termination of exemp-
tion from payment of dues under Article I, Section 4, of the
By-Laws be increased above the respective Hmit of member-
ship in any group by this section prescribed, no new mem-
ber in that group, the number of members in which has thus
been increased above the limit by this section prescribed,
shall be chosen until such number shall be reduced, by resig-
nation or otherwise, below such limit.

Section 7. Candidates who do not reside or have a usual

place of business or study within thirty miles of ,

and officers of the United States Army or Navy, irrespective
of place of residence, may be elected non-resident members
of the Club; provided that it is set forth in the proposal
nominating the candidate that he is nominated for non-
resident membership. Non-resident members, except officers
of the United States Army or Navy, shall pay one-half en-
trance fees. Officers of the Army and Navy shall pay no
entrance fee. All non-resident members shall pay one-half
of the annual assessment. They shall not be entitled to
vote or hold office, but shall have all the other rights and
privileges of Jiembers, except that in the event of the dis-
solution of the Club the interest of a non-resident member
elected after January 1, 1908, in the property and assets
shall be a half share only. Whenever a non-resident mem-

461

APPENDIX OF FORMS

ber shall cease to belong to that class by residing or having
a usual place of business or study within thirty miles of
he shall thenceforth be classed as a resident mem-
ber, shall then pay the pro rata balance of the annual assess-
ment for resident members, and thereafter pay the full annual
assessment, and shall pay to the Treasurer an amount equal
to the difference between his original entrance fee and the
entrance fee for resident members at the time of his admis-
sion as a non-resident member; and failure to pay said sums
shall be considered a failure to pay entrance fees and assess-
ment dues. The Executive Committee may, on the applica-
tion of any resident member, place him in the class of
non-resident members upon being satisfied that he is duly
quahfied, his privilege to begin on the first day of April next
succeeding the date of his application.

Article IV
Resignation and Forfeiture of Membership

Section 1. Any member desiring to resign from the
Club shall notify the Secretary in writing of his wish, and
the acceptance of his resignation by the Executive Com-
mittee shall terminate his membership. No resignation
shall exempt from payment of any debt which may be due
the Club at the time, unless the Executive Committee deems
it right to remit such debt.

Section 2. If any member fails to pay any assessment
or other debt within two months after the same is
due and payable, and if he has been so notified, the Ex-
ecutive Committee may declare his membership forfeited;
and in that case the Secretary shall notify him of such
action.

Section 3. Any three members may present to the
Executive Committee written charges signed by themselves
impugning the character or conduct of any other member;
and if it appears to the Executive Committee on inquiry,
after notice to the member so complained of and an oppor-
tunity given him to be heard in his defence, that his conduct
is deserving of censure or has endangered or is likely to en-
danger the good order, welfare, or character of the Club, or
is n violation (^f the Constitution, By-Laws, or regulations
of the Club, the Committee may, by a vote of a majority of

462

CONSTITUTION

all the members thereof, either admonish him, request his
resignation, or declare his membership forfeited. A member
expelled shall have the right to appeal to the Club within
one month after being notified of the action of the Com-
mittee; and upon receiving written notice of the appeal, the
Executive Committee shall call a special meeting of the
Club to be held not more than four weeks from the date of
the call, for the purpose of hearing such appeal. If a major-
ity of the members present at such meeting shall on secret
ballot reverse the action of this Committee, the person ap-
pealing shall be restored to his privileges as a member of
the Club; but until such reversal he shall not be entitled
to use the club-house or enjoy any other privilege of a
member.

Section 4. For any misconduct in the club-house or
infraction of the Constitution, By-Laws, or regulations of
the Club, the proceedings provided for in Section 3 may be
begun by the Executive Committee.

Section 5. On the resignation or death of a member, or
any forfeiture of membership by a member under the Con-
stitution, all his right and interest in the property of the
Club shall cease.

Article V

Meetings

Section 1. The annual meeting of the Club shall be
held on the last Saturday of April, and special notice thereof
shall be sent to all members of the Club. There shall also
be meetings for business and social intercourse on the last
Saturday of February and of March, and for social intercourse
and the reception of strangers at such other times as the
Executive Committee may determine; provided that when
the last Saturday of any month falls upon a legal holiday,
the meeting shall be held upon the Saturday next pre-
ceding.

Section 2. Special meetings may be called by the Exec-
utive Committee, or by the President, and, upon the
written request of five members, shall be so called by
sending written notice thereof ten days beforehand to
each member, and posting a copy of such notice in the
club-house.

463

APPENDIX OF FORMS

Section 3. Thirty persons shall constitute a quorum for
the transaction of business at an}- meeting of the Club.

Section 4. Xo stranger shall be present at any meeting
during the transaction of business.

Article VI
Amendments of Constitution and By-Laws, and Notice.

Section 1. Amendments of the Constitution and By-
Laws must be made at a regular meeting, or at a special
meeting called for the purpose; but any such proposed
amendment shall be posted in one or more prominent places
in the club-house at least ten days before such regular or
special meeting. No amendment of the Constitution shall
be made except by vote of two-thirds of the members present.

Section 2. Unless otherwise pro\'ided for, any notice to
be given to a member under this Constitution or under the
Bj'-Laws shall be deemed sufficient if sent post-paid to the
last address given to the Secretary'' by said member, or in
default of such address if left in the letter box in the Club.

BY-LAWS

Article I

Entrance Fee, Annual Assessment, and Other Indebtedness

Section 1. Resident members shall pay an entrance
fee of fifty dollars. Xon-resident members, except officers of
the Army and Xa^y, shall pay an entrance fee of twenty-
five dollars. The annual assessment for all resident mem-
bers shall be sbrty dollars. The annual assessment for all
non-resident members shall be thirty dollars. A person
joining the Club after the beginning of the fiscal year
shall pay the entrance fee and a proportionate part of
the assessment for the unexpired part of the current year,
reckoning from the first day of the month in which his elec-
tion occurs.

Section 2. The assessment for each 3'ear shall be due
and paj'able on the first day of April; but any resident
memljer or any non-resident member who is an officer of the
United States Army or Navy may pay one-half of his as-

464

CONSTITUTION

sessment on the first day of April, and one-half on the first
day of October.

Section 3. Members who have not paid their annual
assessment or any semi-annual instalment thereof within
thirty days after the same shall be due shall be notified of
the fact, and that their names will be posted in the club-
house at the expiration of fifteen days from the date of said
notice, if payment has not then been made.

Section 4. The Executive Committee may remit the as-
sessment of any member if it thinks it right or expedient
so to do.

Section 5. On the first day of each month, or as soon
thereafter as may be practicable, there shall be sent to each
member notice of his indebtedness on the last day of the
preceding month; and if the same is not paid on or before
the fifteenth day of the month, the name of each member so
in default, together with the amount due, shall be posted,
and he shall be refused further credit until his indebtedness
is discharged.

In case any such indebtedness shall not be discharged be-
fore the end of said month, a second notice shall be sent to
the member in default, notifying him thereof, and that in
case he continues in such default for fifteen days from the
end of said month, he shall be excluded from all privileges
of the Club until such indebtedness is paid; and such mem-
ber shall, upon the expiration of such fifteen days, be so
excluded, and notice to that effect shall be posted.

Section 6. The Executive Committee may at any time
limit or suspend the credit of any member.

No further credit shall be given when a member's indebted-
ness (other than assessment) shall amount to one hundred
dollars.

Section 7. A resident member intending to be absent
from the State for a year or more, and notifying the Secre-
tary in writing to that effect, shall be exempt from the pay-
ment of the pro rata portion of the dues covering the period
of his absence for such year or more, and a non-resident
member who is an officer of the United States Army or Navy,
receiving orders for duty outside of the State and notifying
the Secretary in writing to that effect, shall be exempt from
the payment of the pro rata portion of the dues covering

465

APPENDIX OF FORMS

any period of absence for three months or more when out-
side of the State under such orders, such exemptions to be
allowed in such manner as the Executive Conmaittee shall
determine.

Article II

Cluh-House

Section 1. The club-house shall be open for the recep-
tion of members every day, under such rules and regulations
as the Executive Committee may prescribe.

Section 2. No game of any kind shall be plaj^ed in the
club-house between midnight of Saturday and midnight of
Sunday.

Section 3. Memorandum checks must be signed for all
unpaid bills or charges before the member or guest incurring
them leaves the club-house; and it shall be the duty of the
Superintendent to report any infraction of this rule at once
to the Treasurer.

Section 4. No member or visitor shall give any money
or gratuity to any servant of the Club, and no servant of
the Club shall be employed by any member on any business
of his own out of the club-house.

Section 5. No picture or other work of art shall be placed
in the club-house except by consent of the Art and Library
Committee.

Section 6. No report shall be made or account pub-
lished of any proceeding of the Club, or of anything which
takes place in the club-house, except by special permission
of the Executive Committee.

Section 7. Any destruction of or injury to the property
of the Club or any work of art or curiosity lent to it shall be
paid for by the member who shall have caused the same;
and the amount to be paid shall be determined by the Exec-
utive Committee.

Article III

Exhibitions

Exhibitions held in the club-house may be open to per-
sons not members of the Club, under such regulations, on
.such days, and at such hours, as the Art and Library Com-
mittee may determine.

466

CONSTITUTION

Article IV
Strangers and Temporary Members

Section 1. Persons residing more than thirty miles from
and having no place of business therein, may be intro-
duced by members to the club-house for a single day, or to
any meeting of the Club, except during the transaction of
business, either personally, or by card of introduction; and
the Executive Committee, by any of its members, may invite
such a person, at the request of any member, to use the
club-house for a fortnight. The Executive Committee may,
by vote, extend such invitation to any such person for an
additional period not exceeding one month; and between
any two meetings of the Committee, this power may be
exercised by the President, Secretary, or the Chairman of
the House Committee.

No member shall be entitled to invitations for more than
two persons at the same time; and no person, after the
period of his invitation or its extension shall have expired,
shall be invited again within three months.

Section 2. The Executive Committee may, by vote,
extend the hospitality of the Club to distinguished strangers,
or persons of eminence, for such period as, in its discretion,
it may determine. In the interval between the meetings of
the Committee, such an invitation may be issued by the
President or Secretary of the Club, upon the written ap-
proval of not less than five members of the Executive Com-
mittee.

Section 3. The Executive Committee shall have power,
on the written recommendation of two or more members of
the Club, to admit to the use of the Club for such period as
the Executive Committee may determine any person eligible
to non-resident membership and having a temporary resi-
dence or place of business within thirty miles of The

privileges thus granted may in any case be terminated at
the discretion of the Executive Committee. Any person
admitted under this section to the use of the Club for any
period shall pay in advance dues for the whole of such
period at the rate of five dollars per month. He shall pay no
entrance fee, shall have no vote, and in the event of the dis-
solution of the Club shall have no interest in its property.

467

APPENDIX OF FORMS

Section 4. A person residing in or within thirty

miles of or having a place of business therein, may

be introduced to the club-house for one day by any member
or members, not oftener than once in three months, except
to an entertainment in a private room, and to any meeting
of the Club, not oftener than once a year.

Section 5, A member introducing a person to the club-
house, or requesting an invitation for one, shall enter his name
at the time in a visitors' book kept for the purpose, with his
owm name and the date of introduction. Where the person
is introduced by card, or the invitation is requested by letter,
this entry shall be made by the clerk.

Section 6. In case of the violation by any member of
any of the preceding sections of this Article, it shall be the
duty of the House Committee, upon being informed of such
violation, to call the attention of the member to the section
violated.

Section 7. No visitor or guest shall be permitted to
introduce any stranger to the club-house; and the Executive
Committee shall have the power to exclude any person,
not a member, from the club-house, if it deems it expedient
so to do.

Section 8. A member introducing or requesting an in-
troduction for any stranger to the club-house shall be per-
sonally responsible for all charges and liabilities incurred by
him.

Article V

Nomination of Officers and Annual Report

Section 1. At the regular meeting of the Club next
preceding the annual meeting, a committee of not less than
five shall be appointed to nominate officers for the ensuing
year. The names of the persons so nominated shall be posted
in the club-house at least ten days before the annual meet-
ing, and the Secretary shall notify members of the Club of
such nominations.

Any ten or more members desiring to make a nomina-
tion for office may at any time not less than five days before
the annual meeting send such nomination in ^vriting signed
by them to the Secretary, who shall immediately post the
same in the club-house and shall notify members of the

4G8

CONSTITUTION

Club of such nomination, together with the names of the
signers. No person not nominated as provided in this sec-
tion shall be a candidate for office at the annual meeting
against a person so nominated.

Section 2, At the annual meeting, the Executive Com-
mittee shall submit a written report of the condition of the
Club and of its proceedings during the previous year, with
such facts and suggestions as it may deem it expedient to
lay before the Club.

469

INDEX

[references are to paoes.]

A.
ACCOMMODATION

endorsement by officers of association for profit, 88 note.

ACTION

for libel by members, 97, 203 note.
for subscriptions, 104.

ACTIONS

at law, between members, 102, 103.
by shareholders. 111.

ADMISSION

of members of non-profit association, 208.

ADVENTURE. See Joint Adventure.

AGENCY,

dealers through common agent, 5, 197.
loaned servants, 51.

AGENT,

for mining partnership, authority of, 129 note.
MabiUty of, for excess of authority, 136.

AGENTS,

ratification of acts of, 277, 278.

ASSIGNMENTS,

for the benefit of creditors, 151.

ASSOCIATION

to hold not deal in land not a partnership, 120 note.
to speculate in investments, 75.

ASSOCIATIONS,

broad purposes of, 72.

classification of, 4.

classified according to cohesion, 5.

classified according to pecuniary purposes, 4.

for profit, 4, 8.

for profit and non-profit, distinction between, 37.

for profit, application of law of partnership to, 76.

for profit distinguished from tenancy in common, 66.

471

INDEX

ASSOCIATIONS — Continued.

and partnerships, distinction between, 3.

for profit held partnerships, 38, 40, 100, 114, 120 note.

for profit, property rights in, 78.

incorporation of, 27.

intermediate between corporation and partnership, 6, 38, 58, 65, 73,

200 note, 205.
regulation of, 139-143.
rules as contracts, 272.

B.

BANKRUPTCY.

unincorporated company, 2, 172.

BENEFICIARY.

liabiUty to creditors, 157.
representation of, by trustee, 164.
right of, to accounting, 162.
right of, to information, 162.

See also Cestui que trust; Trustee.

BENEFIT SOCIETIES, 5, 201.
increase in assessments, 271.
liability of members, 283.

nature of members' interest in insurance, 202 note.
nature of obUgation of, to members, 283.

BEQUESTS,

to unincorporated associations, 247, 248.

BONDHOLDERS,

under trust mortgages, 153.

must proceed first through trustee, 166.

BOYCOTT, 288.

BUBBLE ACT, 8.

BUSINESS ENTERPRISE, 70.

BY-LAWS,

of non-profit associations, 231.

C.
CAR TRUSTS, 41, 152.

CERTIFICATES FOR SHARES,
nature of, 106.

CERTIORARI,

to church court, 228 note.

CESTUI QUE TRUST.

nature of interest of, 81-87.
rights of, 46.

See also Beneficiary; Trustee.

472

INDEX

CHURCH TRIBUNALS,

effect of decision of, 263-267.

CLOSED SHOP,

strike to enforce, 288.

"CLUBS,"

formed to evade liquor laws, 212.

COMBINATION

of employers and employees, 154, 285.

COMMON AGENT,

dealers through, 5, 197.

COMMUNISITIC SOCIETIES. See Socialistic Communities.

COMPANY,

definition of, 1.

CONSTITUTIONALITY

of regulation of associations, 140.

CONTESTED ELECTIONS,

in non-profit associations, 233.

CONTRIBUTION, 105, 111 note, 112 note, 122 note, 274.

CONTROL BY MAJORITY OF SHAREHOLDERS. See Major-
ity Rule.

COOPERATIVE STORES, 9.

CORPORATIONS
as associations, 1.

and associations, distinction between, 2.
and partnership, distinction between, 101.
de facto, 26. See also Joint Stock Associations.

COURTS. See Federal Courts.

CREDITORS,

committee, compensation of, 164 note.
remedies of, 132.

See also Levy; Member, Liability op; Shareholder, Liabilitt
of; Trustee, Liability op.

D.
DECLARATION,

of intention, 62.

DEFECTIVE INCORPORATIONS, 4, 5, 26, 191.

DEFINITION OF ASSOCIATION, 1, 3.

DELECTUS PERSONS,
none in associations, 114.
none in mining partnership, 10, 92 note.

473

INDEX

DESCENT OF PARTNT:RS' INTEREST,
in firm realty, 79.

DE^^SE,

to unincorporated association, 246.

DIRECTORS,

election of, 18 note.

power to dedicate land, 134 note.

DISSOLUTION,

by death of shareholder, 114, 118, 119.
by transfer of shares, 111, 112, 114.
does not terminate habihty of shareholders, 109.
of joint stock association, 17, 18 note.
of non-profit association, 207, 2.51.
notice of, by retiring shareholder, 110, 112 note.
See also Wixding Up.

DmDENDS,

apportionment between life tenant and remainderman, 15 nof-e,

120 note.
duty to declare in joint stock associations, 18 note.

DORMANT PARTNERS, 110.

'DO^yEB.,

in lands of associations, 79. ^

DUES,

increase of, 269, 271.

E.

EARLY COMPANIES, 8.

ELECTION,

of officer, proof of, 91.

of trustees, effect of, on nature of organization, 48, 51, 64.

EMPLO\'ERS' ASSOCIATIONS,
nature of, 5, 202.
liabiHty of members of, 285.

EQUITABLE CON\^RSION,

as apphed to shareholder's interest in realty, 85-87.

ESTOPPEL,

to deny membership, 107.

EXECUTOR,

of deceased shareholder, liability of, 119.

EXPULSION,

damages for wrongful, 224.
of members of non-profit associations, 213-224.
of members of non-profit association, distinction between incor-
porated and unincorporated, 216.
of members, effect of property rights, 220, 221.

474

INDEX

EXPULSION — Continued.
of members, hearing, 215.
of members, notice of hearing, 218.
^ of members, socialistic community, 253 note.

F.

FARMERS' TELEPHONE LINES,
nature of, 5, 9, 202, 203, 211.

FEDERAL COURTS,

jurisdiction in suits to which associations are parties, 2 note, 19.
jurisdiction of trustee, 165.

FIDUCIARY OBLIGATION,

of members of associations, 273.
of members of syndicates, 183 note.

FOREIGN ASSOCIATIONS,

doing business outside state of organization, 15 7ioie.

FOREIGN TRUSTEE,

doing business outside the state of appointment, 168.

FORMAL ASSOCIATIONS,
for profit, 4, 7, 28.
for profit, law applicable to, 39.

FRATERNAL ORDERS,
nature of, 5, 37, 200.

H.
HEARING,

before expulsion, from non-profit association, 215.

HOLDING COMPANIES, 44, 73.

I.

INCORPORATED AND UNINCORPORATED

non-profit associations, 207, 208.

INCORPORATION,

of association, effect on title to property, 244, 245.

INDICTMENT,

for larceny from association, 3 note.

INFORMAL ASSOCIATIONS

for profit, 4, 8.

for profit, law applicable to, 36.
for profit, membership in, 77.
for profit, partner to actions, 94.
for profit, pleadings, 94.

INHERITANCE TAX,

on shares, 142.

on non-resident shareholder, 81 note.

475

INDEX

INSURANCE,

what is transacting business, 174 note.

INSURERS, LLOYDS. See Lloyds Insurance.

INTERNAL AFFAIRS,

of non-profit associations, interf erence of courts with, 227.
courts will not interfere unless property or civil right involved, 274.

IRRIGATION DITCHES, 10.

JOINT ADVENTURE,

definition of, 6, 186, 204.

JOINT STOCK ASSOCIATIONS, 12.
actions by and against, 15 note, 16.
citizenship of, 14 note, 15, 16.
consohdation of, 17 note, 18 note.
dissolution of, 17, 18 note.

doing business outside the state of organization, 15 note.
held corporations, 14 note, 15, 18.
held partnerships, 13, 14.
hability of, to member, 17 note.
limitation of liabihty, 131.
shares of, personal property, 13 note.

See also Limited Partnerships.

JOINT STOCK COMPANY,

distinguished from corporation, 3 note.

JOINT TENANTS,

distinguished from tenants in common, 193.

JOINT VENTURE. See Joint Adventure.

JURISDICTION.,

of tribunals of associations, right of civil courts to determine, 229.
See Federal Courts.

LARCENY,

from association, indictment for, 249 note.

LENDERS,

held partners, 11 note.

LEVY,

on property of joint stock associations, 17.

LIABILITY,

of agent for excess of authority or fraud, 136.
of members of association for profit, 112 note.
of shareholders in contract, 98.
of shareholders in tort, 99.

476

INDEX

LIABILITY — Continued.

of shareholder for prior debts, 109.

of shareholders, limitation of. See Limitation"; Shareholders,

of shareholders, termination of, 107.

LIBEL,

action by members of association for profit, 97.

action by members of non-profit association, 203 note.

LIFE TENANT AND REMAINDERMAN,

apportionment of principal and income between, 15 note, 80 note,
81 note, 120 note.

LIMITED PARTNERSHIPS, 25.

LIMITED PARTNERSHIP ASSOCIATIONS,
in Pennsylvania, nature of, 19.
citizenship of, 19.
dissolution of, 21 note.
shares in, 23.

liability of members, 20, 21.

See also Joint Stock Associations; Partnership Associations
Limited.

LLOYDS INSURANCE, 5, 171.

actions on poUcies, 177.
association, 172.

LLOYDS INSURERS,

independent contractors, 175-177.
liability of attorney of, 178, 179, 180.
lim.itations on liability, 181.
partners, 12, 174.

LORD BOVILL'S ACT, 11 note.

M.
MANDAMUS,

not proper remedy for reinstatement, 222.

MAJORITY RULE, 53, 206, 233, 236 note, 250 note, 262.

MAJORITY SHAREHOLDERS,
obligations to minority, 92 note.

MEETINGS,

of non-profit associations, 234 note.
notice of, 235, 264 note.

MEMBERS,

actions at law between, 102, 103.

action for libel by, 97.

buying with knowledge, liable for debts, 89 note.

contribution, 105, 111 note, 112 note, 274.

have no right to pay for services, 94.

477

INDEX

MEMBERS — Continued.

duty to exhaust remedies within the association before appeal to

courts, 224.
estopped to deny membership, 107.
expulsion of. See Expulsion.
Uability, exhaustion of assets of association, 281.
habihty of, effect of withdrawal, 281.
habiUty of, benefit society, 283.
habihty for torts of fellow member, 282.
habihty of, to third parties, 275-288.
habihty limited bj' agreement, 280.
meetings of, 234 note, 264 7iote.
mutual obligations of, 93, 273.
fiduciarj' obhgation of, 273.
powers of, associations for profit, 88, 92.
powers of, mining partnership, 92.
property rights. See Property.
remedies of, procedure, 275.
retired. See Retired Members.
right to compel le\'j' of assessment, 274.
right to contribution. See CoNTRiBrTiox.
rights of, Shaker after leaving society sues for his labor, 253 note.
withdrawal, effect of, 205.

MEMBERSHIP,

in informal associations for profit, 77.
in non-profit associations, 204, 211, 221.
is a question of fact, 208 note.
quahfications for, 210,
transfer of, 206.

MERGER,

of cause of action by judgment against member, 102.

MIXING PARTNERSHIP, 4, 10.
authority of agents, 129 note.
distinguished from tenancies in common, 68.
include irrigation ditches, 70.
includes oil drihing, 69.
includes smelting firm, 69.
may have delectus personae, 118.
powers of members, 92.
winding up, 122 note.

MINORITY SHAREHOLDERS,

bill against trustee, 134 riote.

See Majority Rule.
MORTGAGES,

securing bonds, 153.

MUTUAL BENEFIT SOCIETIES. See Benefit Societies.

MUTUAL INSURANCE SOCIETY,
nature of, 202 note.

MUTUAL OBLIGATIONS OF MEMBERS, 93, 273.

478

INDEX

N.
NAME,

of association, imitation may be enjoined, 245.

NATIONAL BANK,

power to acquire shares in associations, 100.

NON-PROFIT ASSOCIATIONS,
definition of, 5, 199.

admission to membership of farmers' telephone line, 204, 211.
dues of, 269, 271.
may become partnership, 207.
action by members for libel, 203 note.
sale of assets, rights of minority, 206.
transfer of membership, 206.
withdrawal of member, effect of, 205.

NOTICE,

of meetings of non-profit associations, 235, 264 note.
of dissolution, actual, 112 note.

O.
OBLIGATION,

payable out of a particular fund, 127, 130, 131 note.

OIL DRILLING PROPRIETORS, 10.

OFFICERS,

contested elections, 233.

powers of, directors dedicating land, 134 note.

powers of, mining partnership, 89, 90, 92 note.

powers of, non- trading firm, 90.

proof of election of, 91.

removal of, by vote of shareholders, 88 note.

tenure of, when no rules, 236 note.

See Agent; Trustees.

P.

PARTIES,

necessity of joining beneficiaries, 160, 164, 243.
to winding up, 122.

PARTITION,

right of member of non-profit association, 273.
shareholder's right to, 32.

PARTNERSHIP,

association for profit held, 36 note, 38, 40, 100, 114, 120 note.

PARTNERSHIPS,

distinction between partnership and association, 3.

479

INDEX

PARTNERSHIPS — Continued.

distinction between partnership and trust, 40.

distinguished from corporation, 101.

dividing product in specie, 69.

fraternal insurance orders, 37.

in use of property, 67.

property, nature of partner's interest in, 78.

See Joint Stock Associations; Limited Partnership.

PARTNERSHIP ASSOCIATIONS LIMITED,
liabiUty of members, 24.
in Michigan, nature of, 23, 24.

See Joint Stock Associations; Limited Partnership Asso-
ciations.

PENALTIES,

for violation of rules, 237 note.

PERPETUITIES,

associations organized under deed of trust, 29.

non-profit associations, 33.

avoidance of, 34.

no right of partition, 121 note.

PERSONAL PROPERTY,

of non-profit association, title to, 249-252.

PEWHOLDERS,

status of, 209 note, 246.

PLEDGE,

of shares, nature of title, 81 note.

POOLS, 11, 134 note, 187-190, 198.

POWERS,

of members of associations for profit, 88.

of members to bind other members, 92.

of officers, non-trading firm, 90.

of officers of mining partnership, 89, 90, 92 note.

PREFERENCES,

by trustee after estate insolvent, 160.

PRESCRIPTION,

rights of associations acquired by, over land of a member, 88.

PRINCIPAL AND INCOME,

apportionment of dividends between life tenant and remainderman,
1.5 note, 80 TLole, 81 note, 120 note.

PROFESSIONAL ASSOCIATIONS,
nature of, 5, 202.

PROMISSORY NOTE,

of treasurer of association for profit, 88 note.

480

INDEX

PROMOTERS,

of corporations, 27.

PROPERTY,

distribution of, to members of clubs, 212.

of non-profit associations, title to, 220, 239.

of non-profit association, effect of incorporation on title, 244, 245.

of religious associations, 254-269.

real estate, conveyance to association in firm name, 88.

real estate, nature of partner's interest in, 79.

right of member to partition, 273.

right of possession, 249 note.

schism in church, 230 note.

title, socialistic community, 253, 254.

PROPERTY RIGHTS,

effect of on interference by civil courts, 233.

minister's salary, 228 note, 229 note.

of retiring member of non-profit association, 250, 253 note, 254 note,

261.
of shareholders, 78.
of shareholders in leasehold, 102.

PROPRIETORSHIP,

of business by partners, 57.

PROSPECTING,

or "grub stake " contract not partnership, 69.

QUASI PARTNERS, 188.

R.
RATIFICATION,

from purposes of association, 279.

of acts of officers and agents, 277, 278.

REAL ESTATE,

conveyance to association in firm name, 88.

of partnership, nature of partner's interest in, 79.
See Property.
RECEIVERS,

of associations for profit, 97, 106 note.

REINSTATEMENT,

of members of non-profit associations, 221,

REGULATIONS,

of associations for profit, 92.
of non-profit associations, 232.

REGULATION

of associations, Interstate Commerce Act, 140.

481

INDEX

RELIGIOUS ASSOCIATIONS,
consolidation of, 256-267.
{ii%'ision of, 26S.
nature of, 5, 200.
property of, 254.

REMOVAL OF TRUSTEES,

effect of, on nature of organization, 49.

REPRESENTATR'E

proceedings in equit}-, 95.

RESERVOIR PROPRLETORS, 193 note.

RESTR.\INTS ON ALIENATION,

associations organized under deed of trust, 29.

RETIRED MEMBER,

of non-profit association, property rights of, 250, 253 ncie, 254
note, 261.

RETIRED PARTN'ER,

liability of, 89 note, 111 TWie.

S.
S.\LE,

by club to members, 251, 252.

of shares in joint stock association, IS note.

SECRET PROFITS,
by shareholders. 94.
by trustee, 134, 160.
of sjTidicates, 134 note, 183 note.

SERVICE OF PROCESS,
on associations, 15 note, 96.

SH.\REHOLDERS,
actions by, 111.

bill against trustees, some of whom are out of jurisdiction, 137.
bill for winding up, 109 note.
certificates, nature of, 106.
dividends. Se^ Dividends.
dormant partners, 110.
executor's liability, 119.
interest, real or personal, 33, 87.

property rights of, in real estate of association, 120 note.
liabihty of. See Liability'.
limitation of liabihty of, 123, 131.

limitation of liabihty, binding as between themselves. 126.
limitation of habihty of, form, 35.
limitation of Uabihty, effect of notice, 124-129.
liabihty, notice of limitation from nature of organization, 129.
limitation of liabihty by express stipulation, 129-131.
482

INDEX

SHAREHOLDERS — Continued.

in joint stock associations, liability of, 17.

liability of, when some absent or insolvent, 122.

nature of interest of, 87.

powers of, 120 note.

power to bind others, 120 note.

power to control trustees of associations for profit, 47, 48, 49, 51, 56.

power to instruct trustees, effect of, 85, 120 note.

power to remove trustees, effect of, 85.

power to terminate trust, effect of, 49, 85.

property rights. See Property.

rights and liabilities of, 98.

right to accounting, 106.

right to compel performance of trust, 133.

right to contribution, 122 note.

right to examine books of joint stock association, 14 note.

right to exoneration, 122 note.

right to partition, 32.

right to possession of property, 133.

SHARES,

issue of, 137.

in joint stock association, property rights, 3 note.

limited voting rights, joint stock associations, 18 note.

in associations as investments, 138.

in associations as property. See Inheritance Tax; Joint Stock
Associations; Property Rights of Shareholders; Tax-
ation.

forfeiture and redemption of, 105.

SHARES, TRANSFER OF. See Transfer of Shares.

SHIPS,

owners tenants in common, 192.

SOCIAL CLUB,

nature of, 5, 200.

SOCIALISTIC COMMUNITIES,
nature of, 5, 9, 202.
held partnerships, 36 note.
property rights of members, 252.

STATUTORY JOINT STOCK ASSOCIATIONS. See Joint Stock
Associations; Limited Partnership Associations; Part-
nership Associations Limited.

STOCK EXCHANGE,
nature of, 5, 199, 210.
"seats," transfer of, 210.

STOCK TRANSFER TAX, 142, 143.

STRIKES,

justification of, 286.

liabihty of members of trade unions for damages, 285.

483

INDEX

SUBSCRIPTIONS,

to shares, liabilitj^ for, 105.
enforcement of, 104, 270.

SUITS,

by members against association, duty to seek relief first within, 106.

SYNDICATES, 5, 11, 136, 150, 182.
agreements, 114.
as partnerships, 11 note.
as trusts, 12, 185.

fiduciary' obligation of members, 183 note.
Uabihty of members, 184 7io(e.
managers, liabihty on contracts, 183.
powers of managers, 184 note.
powers of members of, 183.
right to change membership of, 183.
secret profits, 134 note, 183 note.

T.

TAXATION,

of associations. Federal Income Tax, 140.
of associations. Federal Corporation Tax, 139.
of shares in associations, 82, 141, 142.
of transfers of shares, 142, 143.

TEMPORARY PUBLIC ORGANIZATIONS,
nature of, 5, 202.

TENANTS IN COMMON, 5, 192.

distinguished from mining partners, 68.

distinguished from partnership, 192, 200 note.

office building, 70.

action of majority, 197.

duty to repair, 197.

fiduciary obhgation, 195, 196.

right to possession, 194.

waste by, 192 note, 194.

TRANSFER OF SIL\RES, 107, 108, 109

right to transfer, 87.

not illegal, 114.
• new firm, imphed assumption of debts, 112 note.

liability of transferee for obhgation of transferor, 108.

TRADE UNIONS,

nature of, 202.

contract of national association part of individual contract of

member of local, 282.
liability of niernbers of, 285.

TRIBUNALS,

of unincorporated association, 227.

of association, jurisdiction of, 229, 267.

484

INDEX

TRUSTEE,

appointment of agents by, 167.

as beneficiary, 162.

as managing agent of shareholders, 45.

actions at law against, by beneficiaries, 136.

buying at foreclosure sale, 161.

certification of bonds, 161.

change of, 169.

compensation of, 164.

control of, by shareholders, 61.

control of, power to amend declaration of trust, 58, 64.

control of, power to elect, 48, 51, 64.

control of, power to remove without cause, 58.

control of, power to terminate trust, 64.

delegation of duties, 135, 166, 167.

distinguished from agent, 75.

doing business in other states, 168.

duty of good faith, 160.

election of, 48, 51, 64.

express exemption from liability, 161.

following will of majority of beneficiaries, 166.

indemnity of, 166.

liabilities of. See Beneficiary.

liability to creditors, 156.

liabihty for torts, 156.

liability for co-trustee's acts, 162.

management of trust estate, 167.

mutual obligations of trustee and beneficiary, 160.

not shareholder conducts business, 74.

negligence of, 135, 161, 162.

presumed member, 136 note.

proper plaintiff in suit to protect trust estate, 160, 164, 243.

purchase from shareholder, 135 note.

removal of, 169.

right against beneficiary for indemnity, 163, 277.

right to instructions by court, 168.

secret profits by, 134, 160.

stipulation hmiting Uabihty of, 157.

substitution of, 170.

of associations for profit, 133.

action by majority, 135.

act jointly, 167.

liabiUty joint, several, 157.

See Benepiciaky; Cestui que trust; Shareholder.

TRUSTS, 4, 149.

distinguished from partnerships, 40.

for bondholders, 153.

for charity, 247.

for creditors, 151.

for unincorporated associations, 240.

for religious associations, effect of schism, 256.

485

INDEX

TRUSTS, — Continued.

for association, enforcement of, by beneficiary, 241.

property, conveyance of, 244.

rights of creditors, 15.5-15S.

under wills to carrj' on business, 150.

■what law governs construction of deed, 149 7wte.

with transferable shares, 42.

without association of shareholders, 44.

U.

ULTRA VIRES, 18 note, 23 note, 91, 93, 238, 240, 260 note, 267.

rXASSOCIATED GROUPS, 4, 170.

UXDER^^TIITERS OF SECURITIES, 5, 150, 1S2.

UNIFORM P.IRTXERSHIP ACT, 144-148.

UXIXCORPORATED COMPAXIES,
under the Bankruptcy Act, 62.

V.

^T:XTURE. See Joint Xd^-t.^tcre.

VOLUNTARY ASSOCLITIOXS, 1.

VOTIXG TRUSTEE,
duties of, 161. 162.

VOTIXG TRUSTS, 154.

W.

^TXDIXG UP,

informal associations for profit, 120, 122.
of mining partnership, 122 ?wte.
of non-profit associations, 273.

See DissoLCTiox; Receivers.

WITHDRAWAL,

of members of non-profit association, 209 note.

486

LAW LIBRARY
I/IS AN(yKLKS

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